The Securities and Exchange Commission said Thursday that it settled with a Wall Street trader accused of intentionally spreading false rumors about Blackstone Group LP's planned acquisition of Alliance Data Corp. while selling the stock short. Paul Berliner, formerly associated with New York-based Schottenfeld Group LLC, agreed to settle the civil action, but as is often the case, he did not admit or deny the allegations. Blackstone
agreed last May, to buy Alliance for $81.75 a share, but after months of wrangling the deal finally fell apart this month.
Continue reading below
According to the SEC complaint filed in the U.S. District Court in Manhattan, Berliner used instant messages to 31 traders at brokerage firms and hedge funds to spread a rumor on Nov. 29 that ADS' board of directors was meeting to consider a revised proposal from Blackstone to acquire their company at $70 a share.
The rumor spread quickly as "the media and certain subscriber-based news services quickly picked up the 'story' and further disseminated it throughout the marketplace," the complaint states.
The result was that ADS' stock price plummeted to $63.65 from $77 per share and Berliner profited from the rumor as he was spreading it by selling the ADS shares short, the complaint said.
The SEC said in a statement that Berliner would disgorge $26,129 in profits and interest, and pay a maximum penalty of $130,000. He is also barred from association with any broker or dealer. - Donna Block
See the complaint from the SEC
See story about deal announcement from TheDeal.com
