by Patrick Gallagher

April 20, 2017

The U.S. Securities and Exchange Commission brought a slew of enforcement cases last week against three penny-stock biotech companies and several stock promotion firms and their hired writers for publishing hundreds of fraudulent stock-touting articles between 2011 and 2014. The articles appeared on numerous investment news sites, most prominently on Seeking Alpha, the popular crowd-sourcing investment platform.

The SEC investigation uncovered multiple “pump and dump” schemes that “left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.”

For the biotech CEOs ordering up the fake stories, “…stock promotion, not drug development, was priority No. 1,” according to

For many investor relations professionals, news of the SEC investigation probably confirmed their skeptical view of Seeking Alpha.

However, if you are among the skeptics, here are four things you may have assumed about Seeking Alpha and the fake news case that are probably wrong:

1. It took an SEC investigation to bring this to light.

Not really. It was likely a combination of Seeking Alpha’s own disclosure and investigative work by a reporter and a contributor that spurred the SEC investigation.

The first hint of a problem came in January 2013, when editors pulled five articles after discovering that a writer had used three different pseudonyms. When it became clear by March 2014 that this was more than a few bad apples, the site took further steps to block paid stock promoters and has since applauded the SEC’s actions.

2. It is bad for Seeking Alpha.

Probably not. The scammers’ high regard for Seeking Alpha (see page 3 here and page 4, here) actually validates the site’s reputation and impressive reach.

Executive Editor and VP Content George Moriarty told me they haven’t seen any negative impact on the business since the fraudulent activity was reported back in 2014, and the site’s more rigorous controls seem to be having the desired effect.

Plus, the SEC’s enforcement action seems likely to serve as an added deterrent to potential miscreants.

3. It’s just the tip of an iceberg of questionable content.

Or, as Financial Times’ Alphaville put it, “Can we go ahead and put ‘securities analysis’ on the list of things people don’t actually want to do without some guarantee of pay?”

It turns out there are a lot of reasons why Seeking Alpha’s writers do security analysis for minimal or modest compensation, Moriarty told me.

As a review of the bios of legitimate contributors shows, many are active investors or money managers writing to persuade others to buy or sell a stock or to promote their business. Some are analysts in “working retirement.” Others are motivated to share their industry expertise or to distill their own views before they invest.

The site recently introduced a subscription service where top analysts can earn meaningful income. Nine authors have exceeded $100,000 in annual recurring revenue, according to an article by Seeking Alpha’s CEO.

4. It shows that larger companies should have nothing to do with Seeking Alpha.

Wrong. Seeking Alpha probably represents the largest agglomeration of active and engaged individual investors on the internet. The vast majority is focused on the mid-cap to mega-cap range of stocks, and user engagement is high.

None of the fake articles uncovered in the SEC investigation involved bigger companies. These stocks generally have more robust analysis and commentary.

Any company interested in attracting retail investors ought to give the independent research provider some consideration as a cost-effective way to connect with this hard-to-reach pool of investable funds.

Want to discuss ways companies are engaging with Seeking Alpha?  Email me.