The Securities and Exchange Commission (SEC) has charged a New York City taxi medallion loan company with participating in two illegal schemes to pump up the declining value of its stock.

Medallion Financial Corp. and its president and chief operating officer, Andrew Murstein, were charged by the SEC on Wednesday with violating the antifraud, books and records, internal controls, and anti-touting provisions of the federal securities laws. Murstein was also charged with lying to the firm’s auditor.

As part of the same complaint, California-based media strategy company Ichabod’s Cranium and its owner, Lawrence Meyers, were charged with fraud and touting. Ichabod’s Cranium formerly did business under the name Asymmetrical Media Strategies.

The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties against the defendants, as well as an officer-and-director bar against Murstein.

The details: Medallion Financial’s primary business was lending money to taxi drivers in New York, Chicago, and Boston and its suburbs so the drivers could buy taxi medallions. The value of New York City taxi medallions grew from $200,000 each in the 1990s to more than $1.3 million by 2015, the SEC stated. But the ascending popularity of ridesharing companies Uber and Lyft threatened the viability of the taxi industry and the value of taxi medallions.

The changing marketplace affected Medallion Financial’s stock price, which fell from $17 per share in 2013 to $3 per share just two years later.

In response, Murstein participated in two schemes to artificially inflate Medallion Financial’s stock price, the SEC said.

The first scheme, which lasted from 2014-16, was an online stealth campaign to place positive stories about Medallion Financial on various blogs and websites. The company paid Meyers and Asymmetrical Media Strategies approximately $65,000 to place the stories, opinion pieces, and positive comments on the Huffington Post, Seeking Alpha,, and other websites. Meyers and others created fake identities so the coverage would appear credible to investors, the SEC said.

Murstein also paid another public relations firm and independent contractor to post anonymous stories and positive comments about the company’s stock, the SEC said. He later paid the contractor “hush money” to deny she posted stories and positive comments anonymously. Neither Medallion Financial nor Murstein ever disclosed to investors the company paid several entities to promote the stock’s value on websites and blogs for two years, the SEC said.

“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock,” said Richard Best, director of the SEC’s New York Regional Office, in a press release.

In the second scheme, Murstein fraudulently increased the carrying value of subsidiary Medallion Bank by “nearly double” to $193 million in the third quarter of 2016, according to the SEC. The move to increase the bank’s value was meant to offset losses related to the declining value of taxi medallions, which were backing the loans to taxi drivers. He then pressured a valuation firm to sign off on the fraudulent increased value of the bank, the SEC said.

When the firm refused, Murstein fired it against the advice of Medallion Financial’s auditor and hired another firm that approved the inflated value of the bank, the SEC said. Murstein lied to the auditor about the reason for firing the first firm, saying in an email, “‘They have been difficult to work with for quite some time. They are too small for a transaction of this size.’”

Murstein hired the new firm by asking it to provide “a pre-determined valuation number dictated by Murstein in exchange for investment banking work,” the SEC said. This arrangement was not disclosed to the auditor or investors.

“By firing the valuation firm and using a new firm that used different assumptions and inputs from what had previously been used, without justification or evidence that it would produce a value more representative of the bank’s fair value, Murstein and Medallion Financial violated GAAP (generally accepted accounting principles),” the SEC said in its complaint.

“Companies also cannot shop for higher valuations when there is no evidence to support them,” added Best.

In a statement included in an 8-K filed Wednesday with the SEC, Medallion Financial called the charges “unfounded” and said, ”[N]one of the allegations in the SEC complaint gives rise to a securities violation.”

The statement said with the stories and articles, the company was attempting to rebut an “online campaign” by short sellers who attempted to “drive down the company’s stock price for their personal profit by spreading misleading and disparaging information and misrepresenting its business.”

“The SEC’s attempt to mischaracterize Medallion’s good-faith efforts defies logic when the SEC does not even allege that the company’s actions had any market impact whatsoever on the price of Medallion stock and Mr. Murstein has never sold a single share of Medallion stock,” the company added.

Editor’s note: This story was updated Dec. 30 to add Medallion Financial’s response statement.