Jim Cramer and "TheStreet" Under Fire

There is an article posted on “The King of all Trades”, a financial blog, about Jim Cramer and “TheStreet.com.” In this article, author Steve Garcia makes allegations stating “any time specific companies gain headwind, in this case Sirius XM Radio, old or simply negative press items conveniently get recirculated from the same conspicuous sources.” This technique is called by Cramer himself as fomenting. Fomenting was a tactic used by the former hedge fund manager to elicit a specific market response.


The author goes on to say that it is unethical to release old or tailored news at critical points in a company’s history to affect a specific stock reaction. He uses Sirius XM Radio as one example. To read how the author alleges that Cramer/TheStreet.com manipulated Sirius XM Radio, go here.

According to a Reuters article published March 18, 2010, the investment news website TheStreet.com was being investigated by the SEC. The probe, was related to how revenue was recorded at one of TheStreet’s subsidiaries. The probe arose after the company announced on Jan. 25, 2010 that it was restating its financial results for 2008 and 2009 due to "certain inaccuracies". You can read more about that article here.

Now all of the above was news to me. However, on March 19, 2010, Adam Feuerstein, reporter for “TheStreet.com” wrote an article about a small biotech company named Generex. Generex is in the developmental stages of producing a diabetes treatment, an insulin product that is taken orally and is absorbed through the inner lining of the mouth. The drug, in trial stages, is called Generex Oral-lyn(TM). Feuerstein’s article made numerous defamatory statements about the Generex, its management, and Generex Oral-lyn. The article made several statements that were misleading or outright misstatements; furthermore, they seemed to be made with the intent to hurt the company and/or the experimental product. If that were not enough, on March 26, 2010, Feuerstein wrote another article defending the first and it was just as obnoxious and derogatory as the first. These articles I knew about because I own Generex stock.

More recently, according to GlobeNewswire, on April 6, 2010, Generex launched a lawsuit against TheStreet.com and Adam Feuerstein in the Supreme Court of the State of New York seeking $250,000,000 in damages for business defamation, product disparagement, and injurious falsehood. Mark Fletcher, Generex’s Executive Vice-President & General Counsel stated “Feuerstein and TheStreet.com have abused their public forum by spreading categorical falsehoods about Generex and Generex Oral-lyn (TM) when a modicum of due diligence would have revealed the truth, an injury then compounded by unfounded and libelous allegation and innuendo. We are now seeking to hold Feuerstein and TheStreet.com accountable for the damage they have unjustifiably inflicted on Generex and its stockholders.”

Garcia stated toward the end of the King of all Trades article, “It is my intent to notify as many people as possible to be extremely careful about what they read and who they believe with regard to financial news. Jim Cramer is no friend to the common investor, in my opinion.”

In another article cited by Garcia, Cramer has gone as far as to describing illegal activities used by hedge fund managers to manipulate stock prices. You can read about that here.

The reason I posted all of this is to make a point. The point is aimed mainly at beggining investors, but even seasoned investors sometimes need to be reminded: Do your own Due Diligence! Do not take Jim Cramer’s or anyone else’s advice without first checking out their so called “facts”. After I read Garcia’s article, I left this comment on the page:

Great article! Everyone who has an audience should be writing about the way “TheStreet” has used unethical and most likely illegal tactics to ruin a company. I do not own SIRI, but I do own GNBT, and Adam Feuerstein outright made up his own “facts” to do harm to this stock's price.

I do not know if Cramer had anything to do with the GNBT articles, but as founder, he is responsible for the articles on his site. To make things worse, he did not even issue a statement or fire Feuerstein! Adam Feuerstein was even allowed to write another article bashing GNBT and defend his first article. I know I will never read another article from “TheStreet”.