Tag Archives: Rule 10b-5

Defendant Moldofsky was an on-line “day trader” of stocks. On March 22, 2002, he began posting anonymous messages on an internet website message board regarding Lucent Corporation stock. All of his messages were false and generally stated that Lucent was about to issue public earnings warnings due to deteriorating business conditions. Lucent stock traded significantly lower on the morning of March 23, 2002, until such time as Lucent issued a press release stating that Moldofsky’s chat room messages were fake and incorrect. Upon Lucent’s press release, its stock price rose significantly. Moldofsky was convicted at trial for violating the 1934 Act, to wit, 18 U.S.C. §§ 78ff(a) and 78j(b) and Rule 10b-5. During the trial, he had moved the court for a jury instruction stating that the the jury was required to find beyond a reasonable doubt that the defendant did not know of the Rule 10b-5. The court denied the motion, noting that the No Knowledge Clause might be relevant when it came to sentencing, but that it was not an element of the offense for the jury’s consideration. The court later denied the defendant’s motion for a sentence of no imprisonment, finding that the defendant, an experienced day-trader, had admitted that he knew there were rules against fraud and manipulation of stocks. Continue reading →