SEC Files Complaint Against Former Richard Petty Motorsports Majority Owner

SEC Files Complaint Against Former Richard Petty Motorsports Majority Owner

The Securities and Exchange Commission has filed a complaint with charges against Medallion Financial Corp. and Andrew Murstein, the company’s COO and President. The SEC charged the former Richard Petty Motorsports majority owner with illegally engaging in two schemes in an attempt to reverse the Medallion Financial Corp.’s declining stock price.

The SEC announced the charges in a press release issued on Wednesday, December 29. The release stated that a key part of Medallion Financial’s business was making loans backed by taxicab medallions to owners and operators but that the rising popularity of rideshare apps such as Uber and Lyft led to a decline in the company’s stock price.

The SEC complaint alleges that Murstein and Medallion engaged in illegal touting by paying a public relations firm, Ichabod’s Cranium, “to place positive stories about the company on various websites.” The list of examples included the Huffington Post, Seeking Alpha, and TheStreet.com.

The SEC complaint also alleged that Ichabod’s Cranium owner Lawrence Meyers and others created “fake identities” in order to make the opinion pieces about Medallion Financial and its stock appear “credible.” The complaint alleged that Medallion and Murstein fraudulently increased the carrying value of the Medallion Bank.

“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock,” said Richard Best, Director of the New York Regional Office, in the press release. “Companies also cannot shop for higher valuations when there is no evidence to support them.”

The SEC Seeks Several Penalties in the Complaint

According to the press release, the SEC’s complaint charged Murstein and Medallion with “violating the antifraud, books and records, internal controls, and anti-touting provisions of the federal securities laws.” The complaint also charged Murstein with making false statements to Medallion Financial’s auditor. Finally, the complaint charged Ichabod’s Cranium and Meyers with touting and fraud.

The SEC announced in the press release that it seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties. In addition, the SEC seeks an officer-and-director bar against Murstein, which would keep him from serving as an officer or director of a publicly-traded company for a specificed amount of time.

“We intend to vigorously defend against the SEC’s unfounded charges,” Medallion Financial said in a statement, courtesy of Bloomberg. “None of the allegations in the SEC complaint gives rise to a securities violation, and we are confident that the full record will show that Medallion Financial Corp. and Andrew Murstein complied with the law.”

The Charges Occurred 22 Days After a Major Sale

Murstein and Medallion purchased the majority stake in Richard Petty Motorsports in 2010 amid concerns of financial issues for the Cup Series team. The company remained a prominent partner of the NASCAR Cup Series until December 1, 2021, when another company purchased the majority stake.

RPM and GMS Racing issued a joint statement on December 1 and announce a transaction between the two teams that included majority ownership in RPM and its two charters. The statement did not provide further details at the time, but an SEC filing from December 2 revealed that GMS Racing paid Medallion Financial $19 million for the majority stake in RPM and the two charters.

Richard Petty and GMS Racing’s owner Maury Gallagher met with media members at the NASCAR Hall of Fame on December 7 and unveiled the rebranded Petty GMS Motorsports. They discussed the future of the Cup Series organization and confirmed that Erik Jones and Ty Dillon will be teammates during the 2022 season. Petty GMS Motorsports also announced that the No. 42 was back in the Petty family with Dillon as the driver.