WASHINGTON (CN) - Two assistant professors at Florida State made $420,000 through illegal naked short-selling and will cough up $672,000 to settle the charges, the SEC said.
The professors used only $100,000 of real money to make $2 billion worth of sales and purchases of call options and stock, and made $420,000 from it, the SEC said in its administrative cease and desist order.
The SEC order identified Gonul Colak and Milen Kostov only as assistant professors at "a Florida University." The men identify themselves as employees of Florida State, in Tallahassee, on their Internet home pages.
Colak, 39, teaches finance; Kostov, 40, was an assistant professor of engineering.
Naked short selling involves selling shares without having the shares to deliver, and then "intentionally failing to deliver the securities within the standard three-day settlement period," the SEC said in a statement announcing the settlement.
Colak and Kostov used "sham reset transactions [which] created the illusion that they had delivered the underlying securities when in fact they had taken no steps to do so," the SEC said in a statement. "They maintained the uncovered naked short positions and profited."
According to the cease and desist order: "Respondents sold approximately $800 million worth of call options and purchased at least $1.2 billion worth of common stock in over 20 issuers. Over the course of their scheme, respondents reaped trading profits of approximately $420,000 on an initial investment of $100,000. Respondents agreed that Colak would receive 68 percent of the profits for providing the initial funds and Kostov would receive 32 percent of the profits for executing the trading strategy."
Florida State's administrative offices were closed Sunday. A spokeswoman for the school told Reuters that Colak still works for the Gators, and that Kostov has not worked there since 2012.
Colak has to pay $457,575: $285,600 in disgorgement plus interest of $21,975 and pay a fine of $150,000, all within one year.
Kostov must pay $214,740: $134,400 in disgorgement plus interest of 10,340 and a fine of $70,000, also within one year.
As is customary with the SEC, though the men have to cough up the money, they need not admit that they did anything wrong, though they have to promise not to do it again.
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