ZiaSun Sues Its Online Critics As Posts Get Nasty And Personal
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
August 13, 1999
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 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 asLycos. 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. 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.
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.
Mr. 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 Mr. Tobin, ZiaSun's president. The message reads: "We want your wife! Where is she? Oh well Michelle will do in a pinch." Michelle is Mr. Tobin's daughter.
Besides Mr. 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.
Mr. Morelock, Mr. Schneider, and Mr. Joakimidis contend ZiaSun is trying to intimidate them to stop revealing damaging allegations about the company with its lawsuit.
Mr. 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," Mr. Schneider wrote in one of his postings.
ZiaSun officials are infuriated by the online attacks. Mr. Elder said the repeated attacks were deterring shareholders and hurting the company, which said it earned 11 cents per 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 Mr. 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 Mr. Elder. He said ZiaSun is willing to settle for an apology from all of the defendants in the lawsuit except Mr. Worthington, the man the company alleges was behind the message mentioning Mr. Tobin's wife. "He crossed the line from being critical to threatening," Mr. 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 Mr. Elder said it will start "introducing" students to Swiftrade.
--------------------------------------------------------------------------------
Write to Aaron Elstein at: aaron.elstein@news.wsj.com
interactive.wsj.com |
