by Alexander Gladstone
If you have ever ridden in a taxi in New York, Chicago, or Boston, chances are that your cab’s government permit was financed by a company called Medallion Financial. While the taxicab medallion financing kingpin was flush with cash for decades, over the past year the company has been struggling to stay afloat amidst competition from ride-hailing juggernauts like Uber and Lyft.
As the value of taxi medallions – permits required for traditional taxicabs– continued to plummet over the past year, so did Medallion Financial’s stock price. The company’s stock is at USD 2.70 for a market capitalization of USD 65m today, down from USD 17.74 at its peak in October 2013 and a market value of roughly USD 400m.
Enter the bizarre story of Sarah Rabby Frigo. While Medallion was struggling to convince shareholders about the resiliency of their long-term business model and grappling with an estimated USD 352m debt load, Frigo – a purported fashion model turned investor relations guru and freelance writer – began promoting the company as an investment on social media, through finance blogs, and directly to investors, according to three sources familiar with the matter.
In February of 2016, the sources familiar claim Frigo updated her LinkedIn profile to indicate that she had been appointed to the head of investor relations at Medallion Financial. The profile also indicated that she was simultaneously working as a freelance contributor to the Huffington Post, and that her prior experience included work at a series of modeling agencies, the sources said.
(Sources provided The Debtwire Investigations Team with screenshots from the job website to support their claims. But the accuracy of content contained in the images could not be confirmed independently by Debtwire directly through LinkedIn. The sources claim the profile has since been modified, although the current public profile lists Medallion as one of the companies Ms. Frigo follows.)
When Frigo first appeared on the scene back in 1Q16 as someone connected to the taxi business, her LinkedIn profile did not include references to any other experience in finance or journalism, nor did it detail any academic credentials, including a high school or university degree, the sources continued. Her professional summary, according to the screenshots, read as follows:
“For the past eight years I have made a successful career out of being a professional model working and traveling under contract with numerous agencies all over the world, as well as an actress signed with the entertainment agency CESD…..I began consulting for the public financial firm Medallion Financial Corporation ($MFIN), providing, but not limited to: socioeconomic marketing, stock, analysis research and due diligence in the case of potential acquisitions and investment opportunities also involving our capital firm, Medallion Financial, which involves mezzanine lending; and Medallion Business Credit, which involves asset-based lending. I was recently appointed to head of Investor Relations….I began writing financial articles and, upon sending one to Arianna Huffington directly, I was thrilled to have her respond to me by offering me an opportunity to be a freelance contributor to The Huffington Post.”
Frigo’s connection to Medallion continued until late November 2016, the sources said, adding that during that time she appears to have used a pseudonym to post multiple pro-Medallion articles and comments on blogs, including the HuffPo, Seeking Alpha and Yahoo Finance.
A Medallion spokesperson confirmed that Frigo had been involved with the company but also wrote that “she is no longer associated in any way.” The spokesperson declined to elaborate on what her role actually was. Here is the full written company statement:
“Ms. Frigo is not currently, nor was she ever, a Medallion employee. She is no longer associated in any way with the Company. We are not aware of anything she said publicly that was not accurate or otherwise reflected in already publicly available information, and any comments she is alleged to have posted under a pseudonym she would have posted unbeknownst to Medallion.”
Despite Frigo’s attempts to put a positive spin on Medallion’s financial outlook, the company’s stock price fell by close to 60% over the course of that time she toiled to promote the business.
Regardless of the financial outcome of Frigo’s alleged actions, any purposeful effort to influence stock prices could grab the attention of the SEC, the sources noted.
Publishing the stories and comments under a pseudonym, without revealing that a company employee is behind the posts, assigns artificial credibility based on the perceived independence of the authorship, said a lawyer following the situation. That behavior could be viewed as a violation of Rule 10b-5 of the Securities and Exchange Commission, particularly the clause regarding “omitting to state a material fact.”
An SEC representative declined to comment on Medallion specifically or any allegations raised against the company and/or Frigo. The company also declined to comment as to whether Frigo’s activities might have violated securities law.
Medallion Financial, which was founded in 1979 and is controlled by the Murstein Family of New York, is the parent of an intricate web of 15 separate subsidiaries, including a professional lacrosse team, the New York Lizards, a NASCAR racing team, Richard Petty Motorsports, and a fine-art financing company. The primary business of offering financing for taxi medallions has been besieged by increasing delinquencies in its portfolio as competitive pressure from ride-hailing apps such as Uber and Lyft has decimated the value of legacy medallions.
Once upon a time the company managed to buy time from its lenders by shifting assets and capital between subsidiaries, but that time ran out for the first time in October 2016 because of a failure to make good on a loan payment. The company now faces a wave of additional near-term maturities that will be difficult to satisfy.
Medallion is also currently facing a lawsuit in New York Supreme Court brought by Metropolitan Commercial Bank, the lender to the defaulted October loan. MetBank is seeking repayment of roughly USD 10m.
In a recent affidavit filed in the case, Medallion CEO Andrew Murstein noted that MetBank’s decision not to offer an extension on the loan maturity has put the company under considerable financial stress. Further, Murstein claims the announcement that Medallion was in default caused other lenders to revise prior agreements to offer extensions on their loans, and also resulted in scuttling a USD 25m private debt placement that Murstein had been working on.
Murstein’s public statements about the domino effect of a single loan default underscore the importance of maintaining appearances.
Case in point: Frigo’s touted work for the Huffington Post that focused on Medallion. In early May, an Instagram account under the handle @SarahRabby posted a screenshot of an alleged email exchange with Arianna Huffington, the founder of the Huffington Post.
In the caption she refers to her “pen-name email.” The name Jayme Stanley was subsequently used to author HuffPo posts related to Medallion and sources believe it is the name of an actual person with familial connections to Frigo. Variations of a similar name were also associated with Medallion-related comments on finance websites, they add.
Bullish in the Blogosphere
The exact article that Frigo pitched to HuffPo in the Instagram post titled, “Safety in a Subsidiary: Untangling the Web of Perception Surrounding the Taxi Medallion Industry, Uber, TAXI Stock, and Medallion Financial Corporation” appeared under the byline Jayme Stanley on 3 May, 2016.
The article is essentially a promotion for Medallion, including lines like, “The fact of the matter is that MFIN has a hidden gem beneath its solid and consistent stance in the stock market…” and “The first Google search tells you that the Company apparently has a long and successful track record of significant gain.”
The article also includes a statement claiming that Medallion Bank, one of Medallion Financial’s subsidiaries, is “worth double the market capital [of the parent] today.” MFIN stock closed at USD 7.34 on 3 May. The stock is at USD 2.70 today, a 63% decline from the date the article was published.
Under the Jayme Stanley pseudonym, Frigo later published two HuffPo articles, one of which was also a promotional piece for Medallion Financial, while the other essentially provided an argument for why the business models of Uber and Lyft (which present a competitive threat to Medallion) are unsustainable.
On 6 May, the sources said a tweet sent out from the @SarahRabby twitter account, which is now private, contained a link to the “Safety in a Subsidiary” article, that read “My first article for The Huffington Post :)”. The same account later tweeted a link to the second HuffPo article, entitled “Melrose, Medallion, and Medallions…”
For its part, Medallion Financial posted both articles on the “In the News” section of its official website, the sources note. While other articles posted on that section include the author’s name, the HuffPo links were presented on the website without naming “Jayme Stanley,” instead presenting the stories as “By Contributor,” according to the sources. (Neither of the articles currently appear on the company’s site.)
Adding to the spring 2016 promotional blitz, the sources say a user named stanleyjayme in May 2016 began posting promotional comments regarding Medallion Financial on Seeking Alpha, such as: “The stock price is so low this is a great buy,” and “This company is a gem and it’s only a matter of time until the stock pops” and “I think it’s a great idea to buy right now,” etc.
Another user, Jayme, began posting similar, and at times identical, comments on the Medallion Financial page on Yahoo Finance beginning in July or August 2016, such as “I don’t foresee MFIN having any problems with raising debt capital nor do I see the debt market as necessarily being closed,” and “I believe MFIN is as profitable and safe of an investment as it has ever been,” according to the sources.
While the Huffington Post articles were previously made under a contributor page with the name “Jayme Stanley”, they now appear under a page that lists Sarah Frigo herself as the contributor.
The Huffington Post did not respond to requests for comment. Frigo could not be reached despite repeated attempts to contact her through social media, known email addresses, or through her employer New York Models. A source at the modeling agency, however, confirmed both her career as a model and prior work on behalf of Medallion.
By November, rumors of the Frigo/Stanley scheme spread among certain investors and traders that follow Medallion, said the first three sources. As word travelled, Medallion deleted the HuffPo stories from its website.
By 28 November, Frigo had made several changes to her LinkedIn profile, removing “Freelance Contributor to the Huffington Post” from her current position, and changing her position at Medallion from “Investor Relations” to “Consultant,” the sources said, adding that two days later the reference to Medallion was removed altogether.
Frigo’s Twitter account was then set to private, and the Seeking Alpha and Yahoo Finance commenter accounts went dark. There have not been any comments by either stanleyjayme or Jayme since 16 November, 2016.
In an incident separate from Medallion, Frigo made news last November by getting into a scuffle with her roommate, which was chronicled by the New York Post in the story “Models accused of catfight in their Soho Loft.” The story also says she “works at a taxi finance company,” referencing Linkedin as the source.
Whether Frigo herself was singularly responsible for the content of her public writings on Medallion is unclear. Given the fact that her entire work experience prior to Medallion had been eight years of professional modeling, it seems unlikely that she would have had the wherewithal to articulate the complex financial concepts regarding taxi medallions, dividends, leverage ratios, bond yields, and corporate valuations that were featured in the HuffPo articles, the sources concluded.
Editor’s Note: Debtwire Investigations is an editorial initiative brought to you by a hand-picked group of some of our best and brightest investigative journalists. A rotating team of five beat reporters has taken countless hours away from its already expert coverage to go far beyond specific credits and market segments to focus on long-form pieces, deep data dives and impactful investigative analysis.