EConnect also said it fired Elias Argyropoulos, who had been the company's investor relations contact. He's a former stockbroker who was banned from the brokerage industry in 1995 by the National Association of Securities Dealers for stock manipulation and unauthorized trading in his customers' accounts.
***SEC CHARGES ECNC - UPDATE-2***
quote.bloomberg.com.
Econnect Charged by SEC With Internet Stock Fraud (Update2)
By David Evans Econnect Charged by SEC With Internet Stock Fraud (Update2)
(Adds SEC official's quote in 4th paragraph, brokerage name in 9th paragraph.)
Washington, March 23 (Bloomberg) -- EConnect Inc. and its chief executive were charged by regulators with inflating the value of the operator of Internet auction sites by distributing ``false and misleading' press releases over the Internet.
The Securities and Exchange Commission's civil fraud suit alleged eConnect falsely claimed the company and a joint venture partner had a unique licensing arrangement with Palm Inc., the maker of hand-held electronic organizers. Thomas S. Hughes, 52, EConnect's chairman and chief executive, also was charged.
It was the SEC's second move against the company this month. On March 13, the agency halted trading in the stock for two weeks, citing questions about the accuracy of its press releases. ``This should serve as a warning to investors that they should not rely on Internet chat concerning the true value and business future' of stocks, said Valerie Caproni, the SEC's western regional director.
SEC lawyers went before a federal judge in Los Angeles today seeking a temporary restraining order to prevent Hughes or the company from violating federal securities laws.
Neither Hughes nor other company executives were available for comment.
The company's shares have attracted intense interest from investors, with more than 70,000 messages posted on Ragingbull.com, a stock-discussion site. One billion dollars worth of shares were traded in the first eight days this month, before the halt. The shares changed hands in more than 100,000 trades, averaging about 1,000 shares a trade.
The false press releases were distributed electronically and then posted on the Internet, causing the San Pedro, California based company's stock to rise as high as $21.88 on March 9 from $1.39 on Feb. 28, the SEC lawsuit contended.
The suit also alleged that eConnect falsely claimed one of its units had a strategic alliance with Empire Financial Group Inc., a Florida brokerage, that would allow cash transactions over the Internet. In fact, the claimed alliance consists of a non-binding letter of intent between Empire and an eConnect joint-venture partner, the SEC suit said.
Earlier today the company said it hired Stephen Pazian as its new president and chief operating officer. Pazian, 50, was president and CEO of Edison Enterprises, a unit of Edison International, until he was replaced in September.
EConnect also said it fired Elias Argyropoulos, who had been the company's investor relations contact. He's a former stockbroker who was banned from the brokerage industry in 1995 by the National Association of Securities Dealers for stock manipulation and unauthorized trading in his customers' accounts. |
