The Emulex hoax was an instance of securities fraud perpetrated by 23-year-old Mark Jakob on August 24, 2000. Jakob realized a profit of more than $240,000 by shorting the stock of Emulex Corporation but was arrested within a week by the FBI and sentenced to 44 months in prison.
Hoax
To cover his losses, Jakob wrote a fake release stating that Emulex had restated its quarterly earnings to change the company's reported profit to a loss, and that Emulex CEO had stepped down. He sent it to Internet Wire, posing as an Emulex publicist using a Yahoo-based email address that had been registered just minutes earlier from a computer at the El Camino Community College library.
The next morning, the phony release was picked up by Bloomberg Television and other news outlets. Emulex's stock price on the NASDAQ stock exchange dropped from $103.94 to $43.00 in 16 minutes of morning trading, losing $2.2 billion in market capitalization. Once the release had been conclusively debunked, trading resumed on Emulex and the share price recovered almost immediately to close at $105.75. The Securities and Exchange Commission soon filed a civil complaint in order to freeze Jakob's assets and recover his profits from the illegal hoax.
Alejandro Mayorkas, US attorney for the central district of California, said that the FBI tracked Jakob's email to Internet Wire to a computer library at El Camino Community College, where Jakob had been a student until early August. In July 2001 he settled the SEC's civil lawsuit against him, agreeing to pay approximately $353,000 to cover his $241,000 in gains, $97,000 in trading losses he avoided, and $15,000 in interest, per the terms of the settlement. Jakob additionally agreed to pay a $102,642 civil penalty.