TOKYO <--------------GETS NUKED!!!!!!!!!!!
SEC sues 'Tokyo Joe' for securities fraud
Web-based guru accused of scalping, other violations
By William L. Watts, CBS MarketWatch
Last Update: 4:43 PM ET Jan 5, 2000 See:
WASHINGTON (CBS.MW) -- Federal regulators filed civil fraud charges Wednesday against Yun Soo Oh Park, the self-proclaimed day-trading guru and Web site operator known as "Tokyo Joe," alleging he defrauded members of his Societe Anonyme stock-alert service.
Today on CBS MarketWatch
Investors pick up blue chips
Jobs is 'interim' CEO no more
Macworld descends on San Francisco
Loeb: Don't push the panic button
Goldman Sachs, Morgan Stanley shares sunk by cuts
More top stories...
CBS MarketWatch Columns
Updated:
01/05/2000 4:21:18 PM ET
In a complaint filed in federal court in Chicago, the Securities and Exchange Commission said Park, a New York resident, engaged in scalping, lying about his performance record, and illegally touting stocks without disclosing that he had received shares from the issuer in return for making a positive recommendation.
Park's attorney didn't immediately return a phone call seeking comment.
The SEC said Park and Societe Anonyme charged members up to $200 a month for stock picks and other investment advice. Meanwhile, Park allegedly misled members or lied to them about his positions in the stocks he was recommending.
"The Internet has witnessed the rapid growth of Web sites run by self-proclaimed investment gurus. Today's action makes clear that we will not tolerate fraudulent conduct or undisclosed conflicts of interest by those peddling investment advice on the Internet," said SEC Enforcement Division chief Richard H. Walker.
According to the SEC, Park was contemporaneously selling the same stocks he was recommending that Society Anonyme members buy. In such cases, Park allegedly bought the stock shortly before his buy recommendation and then profited by selling the stock into the buying flurry that followed his recommendation. In legal parlance, the practice is called "scalping," though it's not to be confused with the trading strategy of the same name.
The commission also said Park posted "materially false and misleading" performance results on his Web site and accused him of "illegally touting" shares without disclosing that he had received stock from the issuer in exchange for his recommendation.
In an example of scalping cited by the SEC complaint, Park allegedly bought 16,000 shares of The Vialink Company (iqiq) and 8,000 shares of Vialink warrants on Dec. 11, 1998. Three days later, Park identified the company as his pick of the day, without disclosing that he already owned shares or that he had placed a limit order to sell them one minute before issuing his buy recommendation, the SEC said.
Vialink volume reached 457,000 shares after the buy recommendation, exceeding average daily volume by nearly 1,000%. The stock's closing price rose from $7.38 on Dec. 11 to $8.50 on Dec. 14, allowing Park to profitably sell his entire position, the SEC said.
The SEC also alleged that Park didn't disclose that performance results posted on his Web site included hypothetical trades. The agency said past performance pages on the site also contained more than 800 false or misleading entries, giving rise to differences between the actual and reported gain or loss on these trades ranging from about 1 percent to 2,000 percent.
The complaint also said Park failed to disclose that he had received 100,000 shares of cigar marketer DCGR International Holdings in exchange for recommending the stock.
Chat room prominence
Park, 50, first rose to prominence as a stock picker in 1998 after posting thousands of messages on Internet bulletin boards such as Silicon Investor and Raging Bull, using the screen names "Tokyo Joe" and "Tokyo Mex."
Investors soon began contacting Park directly, seeking further information about his stock picks and trading strategies. Park eventually compiled a list of e-mail addresses and sent his stock picks directly to the individuals.
Park then opened an Internet site called Tokyo Joe's Cafe, which was later succeeded by Tokyo Joe's, which still exists. Societe Anonyme members were able to access restricted areas of the Tokyo Joe's site and received exclusive e-mails containing his daily stock picks.
The membership of Societe Anonyme grew from 200 in July 1998 to around 3,800 in May 1999, the SEC said. The complaint said Park collected more than $1.1 million in fees from members.
Old scam, new format
The SEC has increased its focus in the past year on Internet-related stock scams, forming a task force within the enforcement division dedicated to Web-related cases. See SEC Web site.
That said, the case against Park may mark the first such fraud charges brought against the operator of a stock-alert Web site, said Tim Warren, associate director of the SEC's Midwest regional office in Chicago.
"I don't think we've brought a case quite like this," Warren told CBS.MarketWatch.com. "Basically, the scam he's been doing is an old scam."
Indeed, enforcers say many scam artists have simply adapted old tools, such as newsletters and cold calls, to Internet Web sites, chat rooms and spam e-mails.
The complaint doesn't specify how much Park is alleged to have netted from his activities, but Warren said the figure would be "in the hundreds of thousands of dollars."
The SEC is seeking a permanent injunction against Park and Society Anonyme, which is operated from Park's New York home, as well as disgorgement of any ill-gotten gains and civil penalties.
William L. Watts is an online reporter for CBS MarketWatch.
|
