I posted many things that are completely relevant to this stock and all the bull touts brushed them aside and/or lived in denial. Go back and Look, punk. It's a crappy stock and let this be a lesson learned to all you people who rely upon others for "research" on their "investments."
Internet Mania Overtakes Investors,
Providing Easy Prey For Scam Artists
By ANDREW FRASER
THE WALL STREET JOURNAL INTERACTIVE EDITION
As investors get caught up in the mania over Internet stocks, scam artists
are finding easy victims among the millions of people searching for the next
Yahoo! or Amazon.com.
Con artists are employing an Internet scam with a twist -- and it's gaining
popularity. Unlike the traditional Ponzi Schemes or pump-and-dump scams
that have migrated online, this one is feeding off investors' greed for
companies with Internet-related business.
Scam artists are convincing unwitting investors to invest in sham companies
by putting out bogus press releases touting their Internet prowess, by
setting up phony e-commerce Web sites, or simply by tacking a ".com" at
the end of their monikers.
Their come-ons at times appear so legitimate that they're not snaring just
inexperienced investors or ordinary individuals. Financially savvy investors,
wealthy businessmen, doctors and engineers are among the people being
duped by these schemes.
Law enforcement authorities have been fighting a losing battle to keep up
with Web-savvy criminals as the burgeoning Internet opens a whole new
way for scam artists to ply their trade cheaply and easily to millions of
potential victims. Traditional investment scams, which were plied via the
telephone or junk mail, required a lot of hard work to snare even one
target.
"Nothing can be easier than creating a company with a product that doesn't
exist and collecting a lot of money from investors," says Bill McDonald,
assistant commissioner of enforcement at the California Department of
Corporations. "The con artists are not stupid. They follow the headlines."
Federal and state authorities recently have been warning individuals to
beware of Internet scams. Those warnings have come as law enforcement
officials beef up their efforts to hunt down Internet-related fraud, making
cases involving the largely unregulated and hard-to-police medium a
priority.
The Securities and Exchange Commission doesn't keep figures on specific
types of Internet-related fraud. But the agency says overall
Internet-investment scams have been growing exponentially, despite the
highly publicized and unprecedented nationwide crackdown launched in
October that snared 44 alleged scam artists and companies.
The agency receives about 200 to 300 complaints each day about
Internet-related fraud, double the number it received prior to October, says
spokesman Duncan King. It has taken enforcement action about 60 times
in the past three years for Internet-related scams, he says, with the rate
steadily increasing. Some 38 cases were brought in 1998 alone through the
month of October.
Anecdotal evidence gleaned from news reports, discussions with state and
federal securities regulators and a closer look at some of the cases they
have brought indicate scam artists preying on investors' frenzy over Internet
stocks are becoming a popular method for con artists.
Take a recent case brought by the SEC against a Missouri company,
WARPnet Holdings LLC. In court documents, the SEC described
WARPnet as a company that "purports to provide advanced Internet
service." Although the description raises questions about the validity of the
company, dozens of people were taken in by its slick talk and a list of
renowned business clients that SEC alleges is phony.
The SEC alleges that WARPnet -- which claims to have technology that
would allow musicians to jam over the Internet from separate locations,
and even produce entire albums online -- wooed investors by making
misrepresentations about its business. WARPnet even claimed to have had
contracts with networks ABC, CBS, NBC and ESPN to broadcast the
2002 Winter Olympics over the Internet.
The company also said it had $60 million in contracts from big corporations
to provide Internet-related services; a contract to provide Internet security
for the genealogical library of the Church of Jesus Christ of Latter Day
Saints; a contract to make the Western Governor's University available
over the Internet; and a multimillion-dollar contract to provide Internet
access for a condominium complex in Utah.
The SEC says the whole thing may be a hoax, and that none of the deals
touted by Kevin A. Tauber, WARPnet's chief executive officer, are real.
All of the organizations denied having signed contracts with the company
when contacted by federal investigators.
While the enforcement action raises questions about the validity of the
company, Tom Melton, one of the SEC lawyers handling the case, said the
agency hasn't made any concrete conclusions about whether its technology
claims are bogus, and the investigation is ongoing. He said the case
demonstrates how investors can easily be duped by companies claiming to
be involved in Internet-related businesses.
"It seems like people drop their guards a bit when they find out it's an
Internet company,'' Mr. Melton said. "It is an appealing new technology
and they see the returns we have seen lately and hope for an opportunity to
get in on the ground floor.''
WARPnet's Mr. Tauber, who denied all the allegations in court hearing
Dec. 18, says, "We have no ability to defend ourselves because the SEC
seized all of our nonexisting assets. We can't fight," he said.
Mr. Tauber also called the SEC's charges "bogus." He concedes, though,
that WARPnet currently has only two contracts -- one for fiber-optic
services and the other for equipment. But he denied using misleading
statements to entice investors, and said he and his business partners have a
"brilliant and marvelous" concept. "We are committed to this idea," Mr.
Tauber said. "As far as we can tell, we have done nothing wrong. I have
put everything I've got into this. We are getting railroaded."
While Mr. Tauber has told investors that WARPnet had offices in 17
states, according to court papers, the SEC said he was operating out of a
room at the Hampton Inn Hotel in Salt Lake County, Utah. The address
for WARPnet's office, located in Salt Lake City, belonged to an individual
who disavowed any connection the company, the SEC said.
A federal judge in Salt Lake City has frozen the company's assets and
barred it from using information the SEC alleges is misleading to solicit
money from investors until the matter is settled. The SEC is seeking a
permanent bar against the company, the return of money to investors and
undisclosed monetary penalties. A new court date hasn't been set, but SEC
officials said preliminary arguments could begin in a month.
Before it won the temporary injunction, the SEC in an unusual move,
sought and won a temporary restraining order against the company.
Normally, the agency would seek an injunction, but officials said that
process that would have taken longer.
The SEC, which has been criticized for taking too long to act on fraud
complaints, said quicker action was needed because WARPnet had the
potential to draw in a lot of money from a broad spectrum of potential
investors via the Internet.
Mr. Tauber had claimed in previous press statements to have raised $22
million from investors. He now maintains he has raised only about
$180,000 over two years and received $1.5 million in commitments, far
short of his projected startup costs of $7 million to $10 million. Regulators
said so far they have received complaints from investors who have lost a
total of half a million dollars by investing in the company. In one instance, a
Chicago-area businessman and his son combined lost $250,000, Mr.
Melton said.
The clamor for Internet stocks has resulted in remarkable surges in shares
of some companies -- even those that don't yet have any revenue or profit
to show. That frenzy has given some companies unfathomable market
valuations. Take Amazon.com, for example. The online retailer hasn't yet
proved it can produce earnings, but at around $14 billion, its market value
is nearly eight times that of bookselling giant Barnes & Noble.
"If you are a crook, you ought to be sued for malpractice if you haven't
tried when people are bidding up stocks like Amazon.com by $60 bucks a
day," said Marc Beauchamp, a spokesman for the North American
Securities Administrators Association Inc., a Washington-based umbrella
group of state securities regulators.
And scam artists have definitely taken note. In California, home of the
Silicon Valley and many start-up phase high-tech companies, authorities
have taken action against 22 companies between February 1997 and
October 1998 that were either sham Internet-related businesses or that
were using traditional scams to swindle investors via the Internet. In a
sweep last June alone, the state took action against 10 companies --
demonstrating the explosive growth of these scams.
One company, Time Machines Inc., was selling convertible bonds for a
business that claimed it was going to build a time machine and create a
popular Internet site that would lure people from the future to travel back in
time and help it develop time-travel technology.
In another case, a 36-year-old entrepreneur, Matthew Bowin, concocted
an elaborate scam involving a bogus Internet startup, Interactive Products
& Services. many investors were taken in by Mr. Bowin's sophisticated
Web site and convincing phony prospectus and plans for Internet IPO. The
company claimed to have created a wireless Internet device called
Netcaller, which authorities say was pure fiction. Mr. Bowin, who was
accused of bilking 150 investors out of $190,000, was convicted in
October on 54 felony counts of state securities fraud and sentenced to 10
years in prison.
The Bowin case, which began in April, was one of the earliest instances of
criminal law enforcement action against Internet fraud by state or federal
authorities. Mr. McDonald of the California Department of Corporations
said the number of Internet-related cases in his state are swiftly growing.
Until its coast-to-coast sweep in October, the SEC had never undertaken
such a broad operation to combat Internet fraud. But the agency is beefing
up its efforts. In August, it created a separate unit that focuses on its
growing load of Web-related fraud cases. The unit has about 100 people
out of an enforcement staff of 700 dedicated to uncovering and fighting
Internet fraud. They surf the Internet searching for certain key words on
Web sites, in chat rooms and bulletin boards that might be a tip-off
regulators to the next scam.
The National Association Securities Dealers, a self-regulating organization
that owns the Nasdaq Stock Market, uses software to search the Web for
possible fraud schemes. Some big states, such as California, which is
seeking money in 1999 for six new positions just to deal with cyberfraud,
also have active Internet surveillance programs. And the states' securities
group also is trying to strengthen enforcement at the state level. The group
launched an Internet Neighborhood Watch program in October, setting up
an e-mail address (cyberfraud@nasaa.org) for investors to report possible
scams they discover on the Internet.
Investors themselves who feel they have been scammed or approached by
con artists online have become the vigilantes of the Web, setting up sites
that collect and pass on detailed information about possible fraud to state
and federal officials. These sites, chat rooms and bulletin boards devoted to
Internet fraud -- also act as support groups for victims and resources for
novices who want to avoid being scammed.
"The bottom line is the fraudsters, the crooks, will always go where they
think people will give up money easily,'' says the SEC's Mr. King. "You
might see more cases like WARPnet.''
But law enforcement authorities warn investors to be extra wary when
buying into emerging companies -- especially the ones that are pitched by
fast-talking telemarketers, ones that are touted on the Internet and promise
eye-popping returns, or ones that are talked-up by companies or
individuals who are not registered brokerages or financial advisors. Many
times it's impossible to verify the validity of their claims.
"Its only scam artists who would purport to offer great opportunities in
these types of investments,"' said Brad Skolnick, the Indiana securities
commissioner. "Follow the age old advice: If an opportunity seems too
good to be true then it probably is."
For those that ignore the warnings, Mr. Skolnick and other law
enforcement officials point out that the recovery rate for these scams is very
low. By the time they are discovered, the con men already have spent
much of the money or squirreled it away in offshore bank accounts.
"The best thing to do is practice preventative medicine and not become a
victim," says Mr. Skolnick. |
