This Day In Market History: PairGain Technology Gains 32% On Fraudulent Bloomberg Buyout Report

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On April 7, 1999, PairGain Technologies stock gained 32% after a company employee made a fraudulent online post suggesting the company was being acquired for $1.35 billion.

Where The Market Was: The Dow finished the day at 10,085.31. The S&P 500 finished at 1,326.89.

What Else Was Going On In The World? In 1999, Boris Yeltsin resigned as the president of Russia and was replaced by Vladimir Putin. Dr. Jack Kevorkian was found guilty of second-degree murder for assisting in patient suicide. The average U.S. monthly rent was $645.

PairGain Buyout Hoax: PairGain Technologies engineer Gary Dale Hoke sent PairGain shares soaring more than 30% after he created a fake website designed to mimic the appearance of the Bloomberg LLP news site and posted a fraudulent news story suggesting Israeli company ECI Telecom was buying PairGain in a $1.35 billion deal. Hoke then spread the fake news on Yahoo! Message boards, sending PairGain shares soaring.

Hoke even timed the scam to coincide with the Passover holiday so that it would be more difficult to contact ECI management to corroborate the report. Four hours after the market opened, ParGain issued a statement saying the report was “totally and completely made up.”

Hoke later said his intention was to profit off of trading PairGain stock, but he ended up getting cold feet and never actually bought shares.

Hoke later pled guilty to two counts of securities fraud and was sentenced to five months of house arrest. Hoke was also ordered to pay $93,000 to PairGain investors who lost money because of the hoax.

Ironically, PairGain was acquired by ADC Telecom in a $1.6-billion deal roughly one year later. ADC was later acquired by TE Connectivity Ltd TEL.