BUSINESS
Suit alleging cyber-smear of local firm is dismissed
Mike Freeman
03/03/2000
The San Diego Union-Tribune
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Page C-1
(Copyright 2000)
A Seattle judge has thrown out ZiaSun Technologies Inc.'s lawsuit against eight people it claims engaged in an Internet cyber-smear campaign against the Solana Beach company.
U.S. District Judge Marsha Pechman dismissed the lawsuit this week against the defendants, known as the ZiaSun 8, after she ruled Washington was an improper venue for the suit. ZiaSun filed the suit in Seattle because the Silicon Investor chat room, where most of the messages were posted, is based there.
Lawyers for ZiaSun and its president, Anthony Tobin, aren't done fighting, however. They will ask the judge to reconsider her dismissal, said ZiaSun attorney Patrick Pearce in Seattle.
If unsuccessful, ZiaSun will ask the judge to transfer the case to a proper venue, perhaps San Diego.
"California is probably a strong candidate, but we'll see," said Pearce. "First we will ask for a reconsideration. ZiaSun is definitely going to continue to pursue the lawsuit."
James A. Shalvoy, a Manhattan Beach lawyer, filed the motion to dismiss on behalf of his client, Stephen Worthington , a Northern California resident who posted messages under the alias "Auric Goldfinger."
Shalvoy now has been hired by the most vociferous member of the ZiaSun 8, Floyd Schneider of Saddle River, N.J. Schneider uses the names "thetruthseeker," "floydie" and "crimsthieves."
"I don't think the case has any merit," Shalvoy said. "The plaintiffs seem to believe the First Amendment stops at the Internet."
When asked if ZiaSun 8 postings were libelous, Shalvoy said, "Truth is an absolute defense."
The lawsuit stems from an online war of words in which the ZiaSun 8 posted messages in the Silicon Investor chat room as well as on individual Web sites. The spat gained widespread attention in part because of fears that it and similar lawsuits will have a chilling effect on free speech.
Some messages from ZiaSun 8 members ridiculed the company's financial statements. Others made allegations of criminal conduct and criminal associations by ZiaSun officers. Still others suggested that the company engaged in fraud.
ZiaSun sued, alleging that the Internet posters were engaged in a conspiracy with short sellers to drive down the stock price. In short selling, investors bet that a stock price will fall.
The company also alleged defamation, various violations of Washington consumer laws, racketeering statute violations and interference with expected business.
The judge found there was insufficient reason to sue in Seattle, since no relevant action took place there.
Pearce noted that the judge made no rulings on the merits of ZiaSun 's allegations. ZiaSun is a little-known Internet holding company with business in North America, Asia and other international markets.
In a related case, stock promoter Bryant Cragun, who is backing ZiaSun , sued Schneider and recently won a restraining order that forbids him to refer to Cragun as dishonest, disreputable or a criminal.
Issued by a San Diego judge, the order also required Schneider to post a retraction on his Web site of his "sell recommendation" for ZiaSun stock.
Adorned with cartoons of flying pigs, Schneider's Web site claims, "The Truthseeker is on a quest to expose the scams and irregularities of Wall Street in order to protect mom-and-pop investors."
Schneider, a regional vice president of Real Estate Mortgage Network, did not contest the San Diego order. At the time, he said he couldn't afford a lawyer.
After this week's dismissal, however, he hired Shalvoy.
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HEARD ON THE NET: ZiaSun Sues Online Critics >ZSUN
By Aaron Elstein
08/16/1999
Dow Jones News Service
(Copyright (c) 1999, Dow Jones & Company, Inc.)
NEW YORK (Dow Jones)--Even by the standards of the rough-and-tumble world of Internet message boards, where posters vent their feelings without restraint, the dispute between ZiaSun Technologies Inc. (ZSUN) and its online detractors looks ugly.
To its critics, the small Internet holding company based in San Diego is all hype and no substance.
They believe its press releases promise more than can be delivered and a big rally in its stock is destined to fail. One poster described ZiaSun as "scum." Another called its executives "conning, lying, thieving rubes." Others are more personal, mentioning the wife and daughter of the company's president, Anthony Tobin, and suggesting ZiaSun executives are pornographers.
But ZiaSun says its critics are nothing more than misguided short sellers aiming to depress its stock. It has sued eight of them in federal court in Seattle - including one it says is a San Francisco money manager. The lawsuit, filed June 24, accused the posters of conducting a "defamatory campaign" and acting "with a reckless disregard for the truth."
The dispute has been playing out since late March after ZiaSun , once an unsuccessful beverage bottler called Bestway U.S.A. that's trying to reshape itself into an Internet company, issued a series of press releases promoting its new focus. The releases compared ZiaSun to popular Internet venture firm CMGI and said ZiaSun operated an online brokerage firm called Swiftrade.
Those announcements helped shares of ZiaSun , which trade on the OTC Bulletin Board, surge fivefold to 35. They also attracted a lot of unkind attention for ZiaSun on online message boards. Online critics, including the eight people ZiaSun has sued, have posted thousands of messages on bulletin boards run by Silicon Investor (www.techstocks.com) and Raging Bull (www.ragingbull.com) attacking the company.
The posters, many using anonymous screen names, questioned the company's legitimacy as an Internet concern and statements that it operated Swiftrade.
ZiaSun has since backpedaled on the brokerage issue. ZiaSun acknowledged it does not operate Swiftrade. It owns the name of the Web site, but the brokering operations are conducted by a firm called West America Securities Corp. ZiaSun collects a royalty for referring customers to West America via Swiftrade.
The former bottling company has promoted its new business mix of Internet companies to investors in a press release headlined, " ZiaSun Takes CMGI Strategy to the Next Level," a reference to the well-known financier of such companies as Lycos Inc. (LCOS). A ZiaSun executive also paid 50,000 shares to a stock promoter called Interactive Business Channel to write a positive report about the company.
The report compared ZiaSun 's e-mail service, Pinmail, to Microsoft's Hotmail, and its financial Web site, Mfinance.com, to Marketwatch.com Inc. (MKTW). Hotmail has 40 million users; Pinmail was just launched. Mfinance has six full and part-time employees in its Hong Kong office; Marketwatch.com has 50 full-time staff in New York, San Francisco, London, and Tokyo.
In the weeks following the paid promotion, ZiaSun 's shares got caught in the wave that drove up scores of Internet-related stocks. But then the message-board writers started to pummel the company. ZiaSun Chairman D. Scott Elder said the company did not authorize paying shares to the stock promoter and the executive who did so has since left the company. Interactive Business Channel, which is based in Irvine, Calif., did not return phone calls.
Online Criticism Gets Personal
ZiaSun 's critics have found many issues to hammer. Their postings have grown increasingly nastier and in some instances very personal. "ZSUN IS scum and must die. I shall make it so," wrote "Auric Goldfinger," a message writer alleged by ZiaSun to be a San Francisco hedge fund manager and former investment banker named Steve Worthington.
Worthington declined to comment on whether he is "Auric Goldfinger."
Auric Goldfinger was the first to disclose that ZiaSun was former beverage bottler Bestway U.S.A. The message writer also has posted a message that ZiaSun considers threatening. It contains a link to a Web site showing individual photos of some family members of Tobin, ZiaSun 's president. The message reads: "We want your wife! Where is she? Oh well Michelle will do in a pinch." Michelle is Tobin's daughter.
Besides Worthington , other people named in ZiaSun 's lawsuit include: Floyd Schneider of Saddle River, N.J., who uses the aliases of "Flodyie" or "Truthseeker"; Mike Morelock of Greenwood, Ark., known on Silicon Investor as "C M Burns"; and message writers using the aliases jjs64, trader14u, realmoney and Alpine Sleuth. Alpine Sleuth is an investor named George Joakimidis from Athens, Greece.
Morelock, Schneider, and Joakimidis contend ZiaSun is trying to intimidate them to stop revealing damaging allegations about the company with its lawsuit.
Schneider, a particularly relentless online critic, has suggested that ZiaSun management are online pornographers. He also accused the company of trying to dupe investors. "WATCH OUT NEWBIES, these conning, lying, thieving rubes are trying to get more CHUMPS into these stock to bail them out of their massive losses," Schneider wrote in one of his postings.
ZiaSun officials are infuriated by the online attacks. Elder said the repeated attacks were deterring shareholders and hurting the company, which said it earned 11 cents a share last year. Shortly after reaching its 35 peak in late March, ZiaSun 's share price started to fall. On Friday, the stock was trading at 9 1/8, after accounting for a 2-for-1 stock split. ZiaSun 's lawsuit, a growing tactic by companies to silence their online critics, followed a bulletin-board message from Tobin in early April, warning detractors that the company was considering legal action if people did not stop posting "outright lies." But that didn't stop the criticism, so the company filed its suit.
"Not responding to the charges could have been taken to mean that they were true," said Elder. He said ZiaSun is willing to settle for an apology from all of the defendants in the lawsuit except Worthington , the man the company alleges was behind the message mentioning Tobin's wife. "He crossed the line from being critical to threatening," Elder said.
ZiaSun , which owns several Internet-related businesses, is no stranger to Internet criticism. The company has also sued Stock Detective, a financial Web site (www.stockdetective.com), for listing ZiaSun as a "stinky stock." The lawsuit alleged Stock Detective painted a very negative and inaccurate picture of ZiaSun .
Until last September, ZiaSun was known as Bestway U.S.A. and its primary business was developing a machine that lets people bottle their own drinks in supermarkets. But the venture failed and last fall the company renamed itself ZiaSun and bought a variety of Internet portals and e-commerce sites, many of which are based in Hong Kong and the Philippines.
In April it acquired Online Investors Advantage Inc., an Orem, Utah, firm that teaches novice investors sophisticated investment strategies, such as options trading. The company plans to start offering the classes in Australia and New Zealand, where Elder said it will start "introducing" students to Swiftrade.
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Net users sued over messages Company accuses 8 of fraud, defamation
Bruce V. Bigelow
07/06/1999
The San Diego Union-Tribune
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Page A-1
(Copyright 1999)
A little-known company with a U.S. office in Solana Beach has sued eight Internet users, alleging that they posted fraudulent and defamatory messages about the company in a conspiracy to manipulate its stock price.
The messages, posted by individuals using aliases such as "trader14U," "Auric Goldfinger" and "realmoney," repeatedly mock the company, called ZiaSun Technologies Inc., as "Stinky Stock."
An increasing number of companies have been complaining to the U.S. Securities and Exchange Commission about purportedly false messages posted to Internet chat rooms and message boards.
One of the most notorious cases of Internet securities fraud was closed last month, when an employee of Tustin-based PairGain Technologies Inc. pleaded guilty to charges stemming from a phony news report posted on the Internet in a bid to drive up the company's stock.
The Internet's cloak of anonymity and participants' tendency to insult or "flame" each other fosters a Wild West atmosphere in such electronic forums, posing new implications for freedom of speech.
But relatively few civil lawsuits have been filed so far.
"As far as I can tell, there have probably been five or six lawsuits of this kind filed around the country," said Christopher Howard, a Seattle-based lawyer representing ZiaSun . A similar defamation case was filed in May against a group of unnamed Internet users by M.H. Meyerson & Co., a New Jersey brokerage.
ZiaSun , which trades over the counter, represents itself as a holding company that operates a number of Internet-based businesses, such as Online Investors Advantage and Asia4Sale, that target Asian markets.
Bud Leedom, who publishes the San Diego Stock Report, says he has never heard of ZiaSun and generally does not include over-the-counter stocks in his report because it is too difficult to separate the wheat from the chaff.
Some of the companies that trade on the so-called "bulletin board" do not report complete financial results, "so I just exclude them," Leedom said.
ZiaSun 's lawsuit, filed June 24 in a Seattle federal court, alleges that many messages posted on the Silicon Investor Web site amounted to a "cyber-smear" campaign against the company and its executives.
"I don't want to say anything. I've never been sued before," said Mike Morelock of Greenwood, Ark., who was named as a defendant in ZiaSun 's lawsuit.
Morelock, a trader who posted Internet messages under the alias C.M. Burns, said he did not want to comment on the record about the case. But he nevertheless discussed it, saying ZiaSun 's lawsuit has absolutely no merit and that the Internet discussion "is one of the funniest things you'll ever read."
More than 3,000 messages have been posted about ZiaSun on Silicon Investor's electronic message board since November 1998, when a ZiaSun forum was established for stocks priced at $5 or less.
Silicon Investor, which is operated by Washington-based Go2Net, was not named as a defendant.
The discussion reflects an intensely sarcastic verbal battle between ZiaSun 's detractors and supporters, with both sides occasionally threatening to report the other's activities to SEC investigators.
The messages also question the credibility of ZiaSun 's executives, including its Hong Kong-based chief executive, Anthony L. Tobin. Telephone calls concerning ZiaSun 's lawsuit were routed to the Veritas Group, an investor relations consulting firm based in Vancouver, B.C.
"We feel strongly that there's a potential conspiracy among these individuals" to drive down ZiaSun 's share price for the benefit of short sellers, said Mark Harris, who identified himself as ZiaSun 's vice president of investor relations.
"We fully intend on launching a stock-buyback program," Harris said. "Why? We want to make their lives as miserable as possible. We intend to fight them with our credibility."
Harris said Tobin was outraged by the false statements posted on the Web site. ZiaSun 's chief executive is a former British journalist and public relations executive who was attached to Singapore's Ministry of Information and the Prime Minister's Office.
"It's one thing to say you don't like the company, but they say that the company is full of crooks and criminals and that it's a fraud," Harris said. "They're making complete false misrepresentations. They're doing anything they can to discredit us."
ZiaSun 's lawsuit also named Floyd D. Schneider of Saddle River, N.J.; Stephen N. Worthington of San Francisco; Paul Harary of Boca Raton, Fla.; and Tom Livia of Boca Raton, Fla. They could not be reached for comment.
Three other defendants, known as "jjs64," "GUS SIDERIS" and "Alpine Sleuth," have not been identified, ZiaSun 's Howard said.
Sandra Harris, an SEC enforcement officer in Los Angeles, said she was unfamiliar with the ZiaSun case, and John Reed Stark, who heads the SEC's Internet enforcement unit, could not be reached for comment.
But in an April 5 speech, the commission's chief enforcement officer said the Internet has "revolutionized the old-fashioned boiler room" and created a bull market in securities fraud.
"Whereas policing insider trading was perhaps our greatest enforcement challenge a decade ago, policing the vast universe of the Internet is unquestionably our greatest challenge today," Richard Walker said.
Walker noted, however, that Internet-related securities fraud comes in several flavors.
One variety is the so-called "cyber-smear" campaigns, often perpetrated by "short sellers" to drive down a stock price on the basis of false information. A short seller is a trader who borrows shares of a stock to sell in the hopes that the borrowed shares can later be replaced at a lower price.
Another variety, Walker said, is the "pump and dump" campaign orchestrated by those who hype a stock by circulating false and misleading information to drive up a stock's price so they can sell their shares at an inflated value.
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March 1, 2000
Overheard:
ZiaSun Cyber-Libel Lawsuit
Is Dismissed on a Technicality
By AARON ELSTEIN and CARRIE LEE
THE WALL STREET JOURNAL INTERACTIVE EDITION
A closely watched cyber-libel lawsuit came to an anticlimactic end when a judge dismissed the case on a technicality, voiding an unusual injunction that had restricted online postings by a vocal critic of a small Internet company.
The decision by U.S. District Judge Marsha J. Pechman in Seattle is a setback for the Solana Beach, Calif., company, ZiaSun Technologies, which had brought the defamation case last summer to halt needling by eight online critics on a Silicon Investor message board.
But it was a relief for message-board participants and for Floyd Schneider, a Saddle River, N.J., mortgage banker and one of the defendants, who was barred by Ms. Pechman from posting "false statements" about ZiaSun on the Web while the case was pending. The ruling makes that injunction moot.
One of ZiaSun's most vocal critics, Mr. Schneider had posted thousands of messages on the Internet about the company and others under the aliases "The Truthseeker" and "Flodyie." The Jan. 21 injunction against him had brought the lawsuit some notoriety.
Ms. Pechman's curbs on Mr. Schneider's postings struck a nerve in the freewheeling world of Internet stock chatter. It also surprised many legal experts, who said it was unusual for such restraints to be granted in cases where freedom of speech was an issue.
In another unusual development, ZiaSun also had persuaded Silicon Investor to delete some postings by Mr. Schneider from the message board, citing the injunction. The Web site ordinarily doesn't delete postings without the writer's consent unless legally ordered to do so.
In dismissing the case, Ms. Pechman didn't rule on the merits of ZiaSun's claims, which alleged a conspiracy by the posters to hurt the company. Her ruling was based on arguments by another defendant, Stephen Worthington, of San Francisco, that Seattle was the wrong venue.
The company had reasoned that the case belonged in Seattle because that's where the computers for Silicon Investor (www.siliconinvestor.com), the stock-chat site on which Mr. Worthington and others allegedly blasted ZiaSun are located. But Ms. Pechman rejected that reasoning.
"A substantial part of the events giving rise to [ZiaSun's] claims did not occur in this district," Ms. Pechman, said in her decision Monday.
ZiaSun had alleged Mr. Worthington, who was identified as a poster called "Auric Goldfinger," Mr. Schneider and the other six defendants wrongly accused the company and its executives of a scheme to mislead and defraud investors.
The company alleged they were involved in a conspiracy to drive down its stock price by posting negative messages on the Internet.
Mark Harris, a spokesman for ZiaSun, called the judge's ruling "a minor setback." "It's frustrating, but we will continue to move ahead legally and immediately file a motion to reconsider," he said.
Mr. Schneider, who used aliases "The Truthseeker" and "Flodyie" to post his messages, said he was relieved but was worried that the company may resurrect the case in another jurisdiction.
Mr. Worthington, an independent stock trader, couldn't be reached at his office Tuesday. Auric Goldfinger, his alleged online alias, declined to comment in a response to an e-mail message.
Mr. Wortington had asked Judge Pechman to dismiss the case, arguing among other things that Seattle was the wrong jurisdiction because he doesn't live in Washington state and none of the relevant action took place there.
Mr. Harris said the suit was filed in Washington state because Silicon Investor's computers are located there, providing a center of activity for the message board posters, who live in New Jersey, Florida, Arkansas, and Greece, among other places.
But Ms. Pechman said that ZiaSun's decision to file the case in Seattle because Silicon Investor's computers are there was insufficient.
If the court denies its request for a reconsideration of the ruling, Mr. Harris said ZiaSun would consider filing lawsuits individually in separate jurisdictions against the people it believes are defaming the company.
Ms. Pechman's decision has triggered heated reactions on Silicon Investor and other message boards.
"Case dismissed! Auric wins! ZSUN 8 wins!" wrote Auric Goldfinger on Silicon Investor. To which a critic quickly responded: "You're still a defendant and a liar."
Indeed, a similar case filed by former ZiaSun president Bryant Cragun against Mr. Schneider and the others continue in a California state court in San Diego.
In that case, Superior Court Judge Janis Sammartino issued a temporary restraining order preventing Mr. Schneider from posting any statements that suggest Mr. Cragun had engaged in criminal behavior. He was also ordered by the California court to retract a press release criticizing ZiaSun which he had posted on his Web site, TheTruthseeker.com.
Mr. Cragun's attorney, Daniel Pascucci, said the federal judge's ruling "doesn't affect anything we're doing in California. We're going to go forward with our case and give it everything we've got," he said.
(aaron elstein, WSJ interactive)
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The proof of Worthington being a registered broker? NASDR has that proof and supplied it to me, with which I discovered that Worthington works for/at "Blackbeard Securities, LLC" of San Francisco, as well as his previous employment at other firms, and also found an article which named Stephen as being employed by "Barbary Coast Securities" - yet another PIRATING reference.
The proof is available to anyone with a telephone to call NASDR for the information. I do not know the laws permitting or forbidding me to publicly disseminate the CRD# of any particular broker or brokerage, so I will refrain from publishing that here, but anyone can call NASDR for that information.
Worthington seems to identify HIMSELF as Auric Goldfinger when he posts on SI boards "Auric Wins!" - well, "Auric" was not a defendant, Stephen Nicholas Louis Worthington was. |
