The Street.com Stock News : Truth Serum
Internet Gadfly Meets a Fraud Case He Doesn't Like
By Beth Kwon
Staff Reporter
12/2/99 7:56 PM ET
Life has gotten tough for Anthony Elgindy. The San Diego short-seller, known for his scathing posts on Silicon Investor, claims to uncover the shady side of Wall Street. But these days, it's Elgindy's past that's raising questions.
Elgindy, a 32-year-old former Nasdaq market maker and retail broker, has taken it upon himself to expose scam stocks, in the process cultivating an extremely loyal following on Go2Net's (GNET:Nasdaq) message board service, Silicon Investor.
The following that he built posting under the handle "Anthony@Pacific" helped him get reinstated to SI by popular demand after he was booted off the site in August for what SI calls "terms of use violations."
He's parlayed that pseudo-stardom into Anthony@Pacific, a private trading site he launched in May, attracting some 300 members to pay $600 a month for his trading calls. In October, he helped fund a new investor message board, WallStreetStand, which had 500 members signed up even before it officially launched.
For his part, Elgindy says he has spent the last five years crusading for the investment community. He testified as a witness in a 1997 civil stock-manipulation trial in Los Angeles federal court and says he has given information to the Securities and Exchange Commission about suspect equities.
Yet not even the SI dispute, or a fine leveled against him in 1997 by the National Association of Securities Dealers, or the revocation of his NASD registration last year, keeps Elgindy down. In fact, stories run by established news organizations still refer to him as an analyst, failing to acknowledge or disclose his past, his positions or his message board caterwauling.
Last week, in the wake of the stunning run-up in shares of remote-access equipment maker Ariel (ADSP:Nasdaq), SmartMoney.com, Dow Jones and the Chicago Tribune quoted him as an analyst with his company, Pacific Equity (the firm's full name is Pacific Equity Investigations). "There is a misperception that remote access means wireless," Elgindy was quoted as saying in a Dow Jones story. The article omitted the fact that their "analyst" may have been biased, since he was shorting Ariel.
On the message boards, he was less tactful. "ADSP Short @ 13 !!!!!!news is completely meaningless and anyone who thinks it is related to wireless technology will be sadly stuck like PIGS!!," Elgindy posted Wednesday on Silicon Investor.
Elgindy's bulletin board bravado doesn't show up when he's cited by the mainstream media.
And his detractors gloated when the stock climbed to reach as high as 57 Friday from around 19, before closing at 37. "I'd love to see this guy standing in a soup line!" a trader who goes by the handle "Sly" wrote the following Sunday.
But more than a poor trading call surfaced after Ariel. On Saturday, an investor who goes by the alias "a_and_p_sucks" posted on Yahoo! Finance certain court filings in a criminal case brought against Elgindy. That posting provided some information on the past of someone who tries to blow the whistle on suspect equities.
No, we're not talking about the fact that Elgindy was fined $30,000 by the NASD in 1997 for performing trades in 1993 on a system designated for retail customers. That has been public knowledge and hasn't deterred Elgindy's followers. ("I didn't know anything about trading; I didn't know how the machines worked. If you hit the wrong button, it'll be a violation," Elgindy says of the disciplinary action.)
The posting instead contained a June 16 indictment of Elgindy by the U.S. attorney for the Northern District of Texas on nine counts of mail fraud and aiding and abetting.
The charges were related to compensation checks Elgindy allegedly received from Bear Stearns (BSC:NYSE) and Barron Chase Securities in 1994 and 1995 while he was simultaneously receiving $7,550 a month in disability benefits from MassMutual. (The mail-fraud charges stem from the delivery method of the disability checks.)
According to the indictment, Elgindy received $68,952 to work as a registered representative in Bear Stearns' Dallas private client service department from March 15, 1994, to July 8, 1994, and $16,000 from Barron Chase from October 1994 to February 1995. The case is scheduled to go to trial in March.
"It's a 7-year-old case and doesn't involve the stock market or anything," says Elgindy, who pleaded not guilty to the charges and says he was suffering from clinical depression at the time he was receiving disability benefits. "This is a cloud hanging over my head, and I'll fight it."
If convicted, Elgindy could face up to $2.25 million in fines and 45 years in prison.
Sure, a disability dispute doesn't have much to do with stock trading. But it's at least embarrassing for someone who champions the cause of investors in digging up frauds to be himself accused of mail fraud.
After the allegations appeared on Silicon Investor, some members questioned Elgindy. "Is it true that you are currently under indictment for securities / mail fraud? If it were, sure this would reflect upon your credibility here," wrote "zaxbowow." Elgindy responded, "My credibility is 100% intact ... what u say isn't true."
Add to that a recent split with Matt Tyson, Elgindy's former lawyer, who was also the Web master and owner of his private site, and it promises a circus of accusations.
To hear Elgindy tell it, there was a financial dispute between Tyson and Elgindy. (Tyson's company, TC Ventures, owned and operated Elgindy's private site.) It worsened when, Elgindy says, Tyson refused to let a third party handle the money. Tyson, on the other hand, says his company delivered checks for roughly $40,000 per month to Elgindy and that Elgindy violated their contract by telling members to cancel their memberships and by steering them to another private site he was building.
"Mr. Elgindy is a world-class salesman," says Tyson. "He can sell glasses to a blind man. He has snowed over a large number of his members."
According to the NASD, Elgindy's registration was revoked last year for failure to pay an arbitration award in December 1998. Further, he never paid the $30,000 fine: Elgindy says he voluntarily left the NASD by stopping payments on the fine.
But as for the fraud indictment, Elgindy says it is a thing of the past. "It was a very difficult time," Elgindy says. "I was depressed, I was taking medication, my wife left me."
Maybe the judge and jury will buy Elgindy's version of the events. And his followers may be well advised to watch their leader carefully.
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