Not the right thread for this, but of interest to all nonetheless...
interactive.wsj.com
February 7, 2001
'Tokyo Joe' Reaches a Deal
With the SEC in Fraud Case
By AARON ELSTEIN
WSJ.COM
"Tokyo Joe," a burrito vendor turned Internet-stock guru, has raised the
white flag in a high-profile fight with securities regulators.
Yun Soo Oh Park IV, known on
Internet-message boards as Tokyo Joe, has
agreed to return about $750,000 of his
trading profits as part of a settlement of
securities-fraud charges brought by the Securities and Exchange
Commission, a person familiar with the matter says. The SEC originally
had been seeking as much as $2.25 million, another person familiar with
the matter says.
Thomas Szromba, an SEC lawyer handling the
case, declined to discuss the terms of the
settlement, but said the pact must now be
approved by the SEC's commissioners. Mr. Park
declined to comment on the case. His lawyer, Ira
Lee Sorkin, former chief of the SEC's New York
office, said Mr. Park will neither admit nor deny
wrongdoing as part of the settlement.
The SEC's suit against Mr. Park, filed in January
2000 in a Chicago federal court, generated
considerable interest because to some investors,
Tokyo Joe symbolized the power of
Internet-message boards during the mania for technology stocks that lasted
until the bubble burst last March.
Mr. Park, 50 years old, had no securities-industry experience. But he
became something of a folk hero, thanks to an apparent flair for picking
stocks that almost invariably rose after he recommended them.
But the SEC asserts in its suit that Mr. Park was a stock manipulator, who
defrauded investors on at least 10 occasions by failing to disclose that he
had bought stocks before recommending them, and who then sold the
shares as prices rose after his advice to buy.
It is no sure thing that the commissioners will
approve the settlement. They could modify its
terms and send the proposal back to the
enforcement staff. "It's not that infrequent" that
they do that, says Bruce Hiler, a former
associate enforcement director at the SEC.
A native of Seoul, South Korea, Mr. Park gained a following starting in
1997, when he began posting his recommendations on Internet message
boards such as Silicon Investor (www.siliconinvestor.com) and Raging Bull
(www.ragingbull.com).
Mr. Park's picks became so popular that in April 1998, he formed Tokyo
Joe's Societe Anonyme Corp. (www.tokyojoe.com), where people who
paid as much as $300 a year could learn about them first. About 3,800
people signed up, and the SEC alleges that Mr. Park collected more than
$1.1 million in membership fees.
The SEC suit alleges that Mr. Park also profited by advising others to buy
shares in companies in which he previously had invested. For example, the
agency alleges Mr. Park bought 16,000 shares, as well as warrants for
8,000 shares, of Vialink Co. on Dec. 11, 1998, and three days later told
Societe Anonyme members the stock was his "pick of the day." He didn't
disclose his ownership or that he had placed an order to sell the shares one
minute before issuing his recommendation, according to the SEC. He
allegedly sold the shares as the price rose to $8.50 a share from $7.38
after his recommendation.
The SEC also alleges Mr. Park failed to
disclose that he was paid by a company
whose stock he recommended and that he
deceived investors by telling them his picks
had performed better than they actually had in
order to boost membership. The SEC didn't
disclose how much money Mr. Park allegedly
made from selling the stocks he was
recommending or how much he collected in
undisclosed fees from the company from
which he allegedly received payment. The
SEC said in its suit that it was seeking
disgorgement of "ill-gotten gains," a permanent injunction against Mr. Park,
and civil penalties.
Mr. Park had vigorously fought the SEC's charges. His lawyers argued
that Mr. Park's stock-picking was protected free speech and wasn't
subject to federal-securities regulations, as recommendations from
registered investment advisers would be, because his advice wasn't tailored
to any particular individual. But U.S. District Judge Charles P. Kocoras
denied Mr. Park's motions to dismiss the case in May and again in
September.
Harry Weiss, a former SEC associate enforcement director, says the SEC
likely will use a settlement with Tokyo Joe to send a strong signal to other
online stock-pickers. "Because this is such a high-profile case, the SEC
won't want its legal and policy message blunted by a settlement," he says.
The SEC was criticized last year for settling with a New Jersey teenager
who, like Tokyo Joe, was accused of failing to disclose that he was selling
stocks that he was simultaneously recommending on the Internet. The SEC
collected $285,000 from the youth, Jonathan Lebed, but allowed him to
keep more than $500,000 in profits. SEC officials said they forced Mr.
Lebed to return profit only where there were "clear instances of fraud."
Mr. Lebed agreed to forfeit the $285,000 without admitting wrongdoing.
Since the SEC sued him, Mr. Park has continued to post stock picks on
his Web site. But the past year has been tough for him and his followers. In
an interview last week, he said membership in his Societe Anonyme
declined to about 600 after he doubled the subscription price last year
amid a sinking stock market.
"A lot of people were wiped out last year, but I am still going, and so are
my core members," said Mr. Park, who said he is profiting by buying some
shares and shorting others. Mr. Park's Web site also highlights charities,
including a policeman's benevolent association in New York, to which he
and his subscribers have donated money.
Write to Aaron Elstein at: aaron.elstein@wsj.com
KJC |
