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Criminal Prosecution Under New York State's Martin Act

By Adam S. Kaufmann and Marc Frazier Scholl

“Short-sellers spread rumors to drive down stock prices.” “Promoters use misleading and exaggerated claims to sell investment opportunities in high-risk companies.”

Although these could be the headlines of today, they were the likes of headlines nearly a century ago. For then, as now, there was no shortage of efforts to dupe the public into investing in “schemes which have no more basis than so many feet of 'blue sky.'” Hall v. Geiger Jones Co., 242 U.S. 539 (1917). Headlines like these eventually led the federal government, in the 1930s, to create the SEC and enact the first national anti-fraud protections.

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