Remember EOSC? We were getting spammed a year or so ago on this out-of-the-blue new competitor to IDX, but recognized it instantly as a scam. Here is an epilogue of sorts, from the NY Times:
"Most Americans may not know it, but there are really two Wall Streets.
"One is the Wall Street of the New York Stock Exchange closing bell, of brash stockbrokers and hair-trigger traders, of big deals and big fortunes, of Microsoft and mutual funds.
"But in the crooked alleys of Lower Manhattan flourishes another Wall Street. This is a world of low-priced stocks and high-priced dreams, of grimy offices and sham companies, of swindlers and touts who prey on average people trying to grab the brass ring in the greatest bull market in American history.
"Like the world of organized crime, with which it increasingly overlaps, it is a violent place full of colorful characters and arcane lingo, of 'naked shorts' and 'pump 'n' dumps.' And it specializes in creating illusions that are as complex as a Broadway play -- and as simple as a game of three-card monte.
"It was in this world that Albert Alain Chalem and Maier Lehmann lived -- and died. The men, who were promoting stocks over the Internet together, were both shot in the head on Oct. 25 and left to die on the marble floor in the $1.1 million home in Colts Neck, N.J., where Chalem lived.
. . .
"One company Lehmann was involved with, Electro-Optical Systems, claimed to be developing a computer gizmo that would read fingerprints, so that users could sign in without having to remember pesky passwords.
"His original role was to hook up the would-be inventor of the product with the 'investment bankers' who were supposedly raising money for the company, according to a decision in a lawsuit filed last year by the S.E.C. in Federal District Court in Manhattan. The inventor was not named as a defendant in the case, which is now dormant while a criminal investigation continues. Lehmann settled the regulators' charges and paid $630,000 in fines and restitution.
"The key, from the con artists' point of view, is to get control of the shares of stock, which might be called Act 1. Sometimes shady brokerage firms stage 'initial public offerings,' but a faster and cheaper method -- the one Lehmann's group used -- is to merge the company with a shell corporation, which already has stock outstanding but no business.
"Almost everyone involved in the scheme is paid with stock; the promoters usually control huge blocks in accounts with false names, often overseas.
"They all make money by making the shares rise in price. They often do this in part by making fake trades at arbitrary prices. In the case of Electro-Optical, regulators contend that the promoters put in an order to buy shares at $7 each, far above the 20 cents for which shares had last changed hands before the promotion began.
"Once the stock price has been pumped up, it is time to lure outsiders into buying the shares. Lehmann helped out with the public relations. He got an Internet newsletter to choose Electro-Optical as its 'pick of the year'; the newsletter's owner was later sued by the S.E.C., which accused him of secretly taking stock and cash from companies in exchange for recommending their stocks; he is contesting the charges.
"Lehmann also approved a press release that claimed, falsely, that Electro-Optical had just received a big order for its products. (Neither order nor products existed.) Investors, entranced with the concept and the rising stock price, began to buy the inflated stock.
"After the pump comes the dump. Those in the know sell their shares to unsuspecting investors. Lehmann had received 100,000 shares, for which he paid nothing and which he put in an account in his wife's name; when he sold, he made about half a million dollars. All told, regulators say, those involved in the Electro-Optical rigging made $12 million by dumping their shares.
"Once the promoters stop pumping the stock, its price usually plunges. Anyone who wants to buy Electro-Optical today can get 10 shares for a penny." |
