NEW YORK (CNNfn) - Well-known hedge fund manager and market commentator James J. Cramer confirmed Monday he was among the countless traders who lost big over a recent bogus merger report about PairGain Technologies Inc., proving the hoax duped even the market's most astute followers.
Cramer, a money manager with Cramer & Co. and a co-founder of Wall Street news and gossip site thestreet.com, said he is among five named victims in a Los Angeles indictment unsealed Friday against Gary Dale Hoke, the former PairGain employee now charged with securities fraud for allegedly masterminding the hoax.
Cramer said he purchased 30,000 PairGain (PAIR) shares April 7 after hearing that the Tustin, Calif..-based company was being acquired by Israeli company ECI Telecom for $1.35 billion.
Aided by the enthusiasm of Cramer and others, PairGain's stock soared 31 percent that day before company officials quashed the rumor and said the Web site announcing the deal -- allegedly posted by Hoke to resemble a Bloomberg News story -- was a fraud.
By the time it was over, Cramer had lost $26,877.
In his April 8 column published on thestreet.com's home page, Cramer said he never saw the bogus Bloomberg story. "I just heard the word on Bloomberg.com: a PairGain bid. And I took stock," he wrote
"I couldn't believe I could buy something in line that had news like this," he wrote. "It didn't seem possible.
"So, of course, I kicked it out. What the heck did I know about PairGain other than it was in talks to be acquired? What was I supposed to do, find out about its book value? How are its orders?"
In addition to the indictment of Hoke, Bloomberg L.P. also has filed a lawsuit against Hoke and others cited for touting the story as appearing on the actual Bloomberg business news site.