Market Abuse: fraudulent scheme to inflate turnover ends in jail

Wolff's conviction brings the number of successful prosecutions to 12.

Homestore.com was a dot com success - or so it seemed. But its turnover (Americans call it revenue) was inflated by a money-go-round that involved paying "millions of dollars to vendors for products and services that Homestore did not need or never used.

The money then came back to Homestore.com as revenue. "

The conspiracy, conducted in Qs1-3 2001, was successful: Homestore.Com's share price soared on reports of USD60 million in revenue that the FBI described as "phony."

But then the money-go-round was discovered and made public. The price collapsed: more than USD1,000 million was wiped off the value of the company's shares. It started a round of cost-cutting to stave off insolvency and made more than 1,000 people redundant. The company was later renamed "Move, Inc" but its shares still trade well below its pre-2001 value. The FBI has emphasised that Move, Inc. fully cooperated in the investigation.

Along the way, Wolff profited personally by selling millions of dollars of stock at inflated prices when he knew Homestore was deceiving the market about its financial results,” according to the sentencing memo produced by prosecutors. They say Wolff realised profits of more than USD8.6 million when he sold his shares in 2001.

But Wolff did have better luck on sentencing in the second trial: first time around he was sentenced to 15 years. The other eleven defendants convicted in this case previously received sentences ranging from probation to 27 months in custody.