Pumping penny-stocks on YouTube
Posted Feb 19th 2007 12:10PM by Zac Bissonnette
Filed under: Bad news, Management, Insiders, Law, Internet, Google (GOOG), Scandals, Columns
bloggingstocks.com
Last week, YouTube removed numerous videos from Comedy Central after the parent company of the network, Viacom Inc.(NYSE:VIA), sent Google a stack of 100,000 takedown notices. With South Park and Family Guy content now missing from YouTube, the site is now being used for a more sinister purpose: promoting penny stocks.
In the past few weeks, I have received numerous emails touting the stock of Mphase Tech (OTCBB: XDSL), which claims to be in possession of a nanotech battery. The company then made history by putting out this press release:
LITTLE FALLS, N.J.-(Business Wire)-February 16, 2007 - mPhase Technologies (OTC:XDSL) (www.mphasetech.com) will post a video demonstration of its Smart Nanobattery on the popular YouTube web site (http://www.youtube.com) today, Friday, February 16th at 5 p.m. Eastern time. The video will explain the technology behind its breakthrough development of a "smart" battery based on nanotechnology. Viewers may access the video at YouTube link youtube.com.
A company that is promoting its high-tech developments to investors on YouTube might raise a few eyebrows by itself. It seems amateur. But then there's another red flag. One of my hobbies is finding the names of the executives of companies I receive spam emails about, and then typing the names into the SEC's litigation database and seeing what comes up. This bit of 15-second Due Dilligence can yield eye-opening results. So I typed in "Ronald Durando" and, what do you know. On November 16th of 2005, he was named as a defendant in a case with the headline "SEC Charges Individuals and Companies with Executing a Fraudulent Pump and Dump of PacketPort.com Stock."
Hmm:
The Complaint alleges that Ronald Durando, a 48-year-old resident of Nutley, New Jersey, privately acquired a majority stake in an insolvent public company, then called Linkon...Durando then paid IP Equity, Inc., a private California corporation that operated an Internet-based stock newsletter, and its principals, M. Christopher Agarwal and Theodore Kunzog, to publish false publicity and bogus recommendations about PacketPort.com in order to pump up the stock price. The share price more than quadrupled following the false publicity, rising from about $4.75 to a high of about $19.50.
The Complaint alleges that Durando, Dotoli, Jaffe, and IP Equity dumped PacketPort.com shares into the pumped-up market in an unregistered distribution, obtaining more than $9 million in illicit proceeds. Registered representative William Coons III was Durando's and IP Equity's broker and was the principal outlet for the fraudulent sales.
This is especially interesting because I've received E-mail from Jonathan Lebed (He's all grown up now...I subscribe to his newsletter for laughs.) touting XDSL with the following disclosure:
My firm Lebed Biz LLC has been compensated by XDSL 400,000 restricted shares for a one-year investor relations contract. XDSL has agreed to register these shares in their next registration statement. We were previously compensated by XDSL a total of 450,000 restricted shares, $55,000 cash, and 175,000 warrants to purchase shares at $0.35 for past investor relations contracts which have since expired. We already sold all of the previously compensated restricted shares but still hold all of our warrants. Never invest into a stock we discuss unless you can afford to lose your entire investment. For our full disclaimer go to: www.lebed.biz/disclaimer.htm
Of course, everyone is innocent until proven guilty. But how stupid do you have to be to invest in a company where the SEC has accused the CEO of involvement in a very similar looking scheme?
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Reader Comments
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1. Durando, in a previous shady company, with the millions he earned from it, may have chosen to go legit, by choosing a company with a promising product -- working prototype of nanobattery has been peer reviewed in journals -- that came out of one of the most respected labs in the country, Bell Labs.
Why not use YOUTUBE and all the free sources available. So, great idea.
I agree with you on hiring Lebed as a paid pumper. Bad idea.
Posted at 4:59PM on Feb 19th 2007 by Mark Esved
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