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The Securities and Exchange Commission has settled its lawsuit against the man accused of issuing a phony press release to manipulate the price of stock in Emulex Corp. Under the agreement, Mark Jakob will turn over $241,000 he made trading Emulex stock, plus $97,000 and interest, the SEC said Tuesday. Jakob pleaded guilty in December to wire and securities fraud and is scheduled to be sentenced Aug. 6. He faces up to four years in prison. The SEC believes Jakob’s actions defrauded investors out of $110 million. Jakob was arrested in August 2000 on charges of creating a hoax that sent the stock of Costa Mesa, Calif.-based Emulex, a maker of fiber-optic equipment, plunging as much as 62 percent in one day — most of that in 15 minutes. The incident raised concerns about the accuracy of information distributed via the Internet and the lightning speed with which it can move the market. The agreement between Jakob and the SEC was approved last week by U.S. District Judge Virginia Phillips in Riverside, Calif. Jakob, 23, of El Segundo, Calif., consented to the order without admitting or denying the government’s allegations. “Mr. Jakob entered into this settlement in an effort to right the wrongs he had made,” his attorney, Joel Levine, said Tuesday. Jakob used his knowledge from a former job at Internet Wire, an online distributor of news releases, to distribute a phony press release saying the chief executive of Emulex had quit and that the company was restating its quarterly earnings from a profit to a loss, prosecutors said. The Associated Press did not run stories based on Jakob’s fake release, but other financial news wire services did. Investigators said Jakob made money by “short-selling” Emulex. Short-selling involves selling borrowed shares of a stock in the expectation that the price will decline. The investor then replaces the stock with shares bought at the lower price, and keeps the difference. Within minutes of the release becoming public, Emulex’s share price plunged until trading was halted on the Nasdaq. Jakob covered his short position and bought additional shares which he later sold at a profit. Emulex’s stock recovered most of its value by the end of the day. Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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