Mark Melnick, Securities Fraud, Georgia 2020

Atlanta, Georgia – Mark Melnick, a New Jersey-based trader, has pleaded guilty to conspiracy to commit wire and securities fraud arising from a years-long scheme to manipulate the prices of short-term call options in large, publicly traded companies.

Melnick, who is the second defendant to plead guilty for his participation in this scheme, admitted to conspiring with others to execute a scheme in which they traded securities—primarily short-term call options—in large, publicly traded companies based on materially false rumors about those companies that they generated and disseminated.

The scheme, which took place between approximately October 2017 and January 2020, involved Melnick, Bart Ross, and at least three other individuals. They conspired to drive up the price of the securities (both the underlying stock and options) by generating and disseminating materially false rumors about the companies.

Call options are essentially a contract that gives the options’ holder the right, but not the obligation, to buy shares of the underlying stock at a set price per share—the option’s strike price—on or before a set future date (the option’s expiration date). Generally, the holder of a call option benefits when the price of the underlying stock increases. Short-term call options are ones that generally expire within a week.

Melnick, who was a day trader and T3 Live Senior Trading Strategist, often provided a “technical evaluation” on whether a particular false rumor would be successful. After a rumor was formulated and finalized, one of the co-conspirators, identified as Individual-1 in the criminal information, was responsible for disseminating the rumor via Trillian to multiple accounts, which would in turn result in the false rumor being disseminated over one or more market subscription services, including Trade The News, TradeXchange, and Benzinga, as well as various Twitter accounts.

Melnick profited from his scheme by selling the options (or other securities) after they increased in price. He would typically sell off his positions shortly after the rumor was disseminated (and after the price of the option or underlying stock had increased).

Melnick is set to be sentenced at a later date. The case serves as a reminder that fraudulently manipulating securities may seem like a harmless crime, but there are real victims and their lives changed because of it.

The FBI is committed to working with our law enforcement partners to stop greed-driven traders like Melnick from profiting illegally.

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