CNN iReport's Citizen Journalist Under Investigation by SEC

Does CNN have the right model for user generated news with iReport? CNN believes so but some people who took a loss on their shares in Apple on October 3 might disagree. According to Bloomberg news:

An 18-year-old posted the fake Internet report that Apple Inc. Chief Executive Officer Steve Jobs had suffered a heart attack, and investigators haven't found evidence the teenager tried to profit from driving down the stock, two people with knowledge of the matter said.

So the iReporter didn't profit but what about others?

The bogus report cut Apple's market value by at least $4.8 billion in the first hour of Nasdaq Stock Market trading before a spokesman for the Cupertino, California-based maker of iPods and Macintosh computers said the report wasn't true. The shares recovered a bit, closing down 3 percent.

CNN's response? 

CNN spokeswoman Jennifer Martin said yesterday that the cable news channel wasn't aware of the age or identity of the person behind the iReport post. CNN doesn't plan to review its procedures for placing content on iReport, Martin said, declining to comment further. ... CNN said earlier this month it was cooperating with the SEC's probe. The network describes iReport as a place for ``unedited, unfiltered news'' and said it ``makes no guarantee about the content or coverage.'' The site was started in August 2006 as part of CNN.com and became a stand-alone Web site in February.

Internet News on what trouble the teen faces:

Whether or not there was a profit motive, the false report may warrant criminal investigation because "it caused a major swing in the stock of a pretty important company," Christie [partner in law firm McCarter & English] said. If so, things may get pretty tangled after that: The SEC does not have the authority to conduct criminal investigations in cases like these, nor can it file criminal charges. As a result, the Department of Justice (DoJ), if it decides the issue deserves its time, may be next in line to take action, Christie said. Yet even the DoJ's hands may be tied. While stock tampering is a federal crime, "if the person responsible was truly a juvenile, the federal court system is not the appropriate place to file charges, no matter what the degree of guilt," Christie added. In that case, the DoJ might work with the state court system to let the juvenile acknowledge guilt for a federal criminal offense in state court.

ZDNet has a copy of the text of the story that CNN removed.