NYRegion
     September 22, 2000

Named a Market Swindler at 15, He Likes Wrestling, the Mets and Penny Stocks

By NEIL MacFARQUHAR

Jonathan G. Lebed was not shy about telling people that he found his suburban New Jersey hometown a singularly uninteresting place.

"Is Cedar Grove a boring place to live?" he wrote in a letter to the editor published in January by the weekly Cedar Grove Observer. "To the younger generation of this town, the answer is most certainly `yes.' "

To help pass the time, Jonathan, like many 15-year-olds, frequented World Wrestling Federation matches at the Meadowlands, went bowling, cheered the Mets and booed the Yankees.

Unlike most 15-year-olds, he also used the Internet to manipulate the stock market, racking up almost $273,000 in illegal gains, the authorities charged.

Federal officials said his scheme, known as pump and dump in the argot of the trade, involved buying obscure penny stocks, hyping them in a barrage of false E-mail messages to various Web bulletin boards that made the choices seem hot and then selling as soon as the price rose.

Jonathan, a junior at Cedar Grove High School in Essex County, became the first minor ever sued by the Securities and Exchange Commission. On Wednesday he settled with the agency, not acknowledging any wrongdoing but repaying a total of $285,000, including interest.

"He's kept his cool and his composure throughout the day — it didn't faze him too much," Tom McCarthy, a classmate since kindergarten, said after school yesterday.

Jonathan is known around the high school as a quiet, intelligent boy who stuck out a bit because he carried a black leather briefcase. He told other students that he traded stocks and encouraged them to join him, but he never revealed the extent of his profits, they said.

"Obviously he's very smart," said Anthony Callie, 16, a fellow junior. "He's not like the most popular kid in school. He's a funny kid. He walks around with a briefcase all the time. But he's still cool."

The first hints that Jonathan might be more than an ordinary investor came several years ago, when he and two eighth-grade classmates at Memorial Middle School finished fourth among thousands of United States and Canadian teams competing in a student stock tournament.

Jonathan said at the time that he would get up at 5 a.m. daily to watch CNBC for stock tips. His team — named Triple Threat after a favorite professional wrestling team — took an imaginary $10,000 in the contest and turned it into anywhere from $24,000 to more than $100,000, depending on which version you hear.

"I personally am in awe of them, and I think they did a wonderful job," Judith Nappi, the middle school principal, was quoted as saying at the time. Ms. Nappi, now principal of the high school, would not discuss Jonathan yesterday.

The investor himself also avoided reporters after school yesterday. But a day earlier he told the press gathered outside his house that he was an easygoing guy who first got hooked on the market at age 11 by watching the stock ticker on television.

His interest grew as he did. In 1997 he used his own name to join Silicon Investor, a Web site offering stock quotes. He posted messages in the site's financial chat room, and by earlier this year he had started an Internet firm with a classmate.

On Silicon Investor, Jonathan said he had a company named Lebed Inc., that his job title was the Great One and that the firm was in Greenwich, Conn. Under the line Favorite Stocks he wrote, "You'll have to pay for this information."

Yesterday there was heavy traffic on the site, resurrecting old messages from Jonathan. One user recalled that Jonathan had once claimed to own a house in Greenwich and another said that he had suddenly vanished from the chat room after praising stock in the World Wrestling Federation that apparently did not do so well.

"That Jonathan Lebed dude disappeared also," noted a message from Jan. 17, 2000, adding, "I hope he's `wrestling' in prison now also."

In another message hinting at what lay ahead, Jonathan praised someone who was apparently pushing stocks on unsuspecting traders. "Wow, you just gave away your secret to success," Jonathan wrote. "You have the inexperienced jabronies who lurk, jump in while you already own tons of shares. Brilliant strategy, sir."

One of his pet peeves in Cedar Grove was the lack of high-speed Internet access, so he argued at town council meetings for an upgrade in the cable television system to provide that.

Paula Brown, a reporter for The Cedar Grove Observer who covered the meetings, remembered that the blond teen-ager's witty, articulate remarks sparked laughter. "One time he said he would be as old as Joe Moroney before the cable TV was upgraded," Ms. Brown said, noting he was referring to a local character believed to be in his 70's. "He's a sort of gadfly in training."

Another time he complained to the council that something should be done about the many wild turkeys allowed to saunter onto roads, stopping traffic. Ms. Brown recalls his saying, "Personally I don't care if they get squashed like bugs."

And although he was making thousands of dollars on his trades, he appeared to be fiscally conservative. Long after he had stopped his trading last February, he wrote a letter to the paper last month arguing against paying the volunteer fire and ambulance crews up to $1,150 per year, calling it "a complete waste of taxpayers' money."

A few months ago, Jonathan and another classmate, Jared C. Glugeth, 16, decided that stock trading was not enough, and that they needed a piece of the Internet action themselves. So they started two Web businesses — PRHost.com and eprolutions.com — designed to help others develop and advertise their own Web sites.

He said the sites were making money but declined to say how much. On their sites, the two mimicked the language of adult companies. When they folded one business into another, for example, they posted a notice saying, "Jared Glugeth and Jonathan Lebed of Promotion Solutions, LLC, are proud to announce the acquisition of PRHost.com." (Jared says that his mother did much of the banking work involved.)

The Web site lists a host of other advice and services, all of which Jared insisted were legitimate. They vary from learning how to take a company public to how to avoid paying property taxes to how to win at casino gambling.

"I would say he is not a bad kid at all; he did not want to do anything mean to anybody," Jared said, adding that he hoped his partner's notoriety would help build their business.

Indeed, the fact that disseminating false information about stocks is illegal seemed to be lost in the hoopla, especially at the high school.

"A lot of people were impressed with it," said Alessandra Vitale, 16, a junior. "If a 15-year-old kid can make $273,000, anything is possible."

Jonathan's father, Gregory Lebed, returned from his job as a railroad supervisor yesterday afternoon, pulling his Mercedes sport utility vehicle into the driveway of their two-story house. He and his wife, Constance, have one other child, a daughter, 12.

Jonathan traded in stocks through accounts set up in his father's name. At first Mr. Lebed ignored the cluster of reporters out front, but then one asked whether he would ground Jonathan.

Mr. Lebed turned on the walkway and gave a short answer. "I'm proud of my son," he said.

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