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Cyber-smearing Outlawed In Californian Decision

In what is believed to be a world first, a California judge has granted a restraining order in a cyber-smearing case which could have a major impact on this practice on the Internet. John Howard reports.

Cyber-smearing has been identified by the US Securities and Exchange Commission as a market manipulation method often used by short sellers in the stockmarket.

The perpetrators take short positions, betting against the target companies, and then publish false statements about the target on the Internet, attempting to drive down the stock price.

A Californian investor, Bryant Cragun asked for the order against Floyd Schneider, publisher of an Internet newsletter called The Truthseeker. Cragun and a firm with which he is associated, ZiaSun, told the court Schneider initiated false statements earlier this month in an effort to drive down ZiaSun's stock value.

Daniel Pascucci, the lawyer who represented Cragun, said " This is the first restraining order of its kind that has been issued anywhere."

"Not only did Judge Sammartino restrain the defendant from any further actions, she also ordered a full and complete retraction of the false statements."

A civil suit for damages is now likely.

The precedent set in this US court case will have international legal ramifications for those cyber-surfers who publish false statements about others on the Internet.

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