The US Securities and Exchange Commission (SEC) has filed civil fraud and insider trading charges against former managers of bankrupt online credit card outfit NextCard.
NextCard was one of the first issuers to offer credit cards exclusively over the Internet.
The SEC has charged former NextCard chairman Jeremy Lent, CEO John Hashman, president Yinzi Cai, controller Douglas Wachtel and CFO Bruce Rigione with financial fraud, accusing them of using accounting changes to conceal business troubles at the firm that began in late 2000.
According to press reports, the accounting scheme propped up NextCard's stock, allowing both Lent and Hashman to sell shares at artificially inflated prices. At the same time the company urged other NextCard employees to keep their options during late 2000 and 2001 so the shares wouldn't drop.
Regulators forced San Francisco-based NextCard to declare its business troubles in October 2001, prompting a run on the stock which wiped out 84% of the company's market value in a day. NextCard went bankrupt in early 2002.
Last year the SEC charged three former Ernst & Young employees who were responsible for auditing NextCard's accounts of tampering with the firms financial records.