Gypsy: Yes, access to WSJ Interactive requires an annual subscription. I think it's around $40/yr. I think this is one of the best values on the Net for a source of very high quality information. Well worth it.
I captured the story for you below.
Brad
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Want to Invest Without Risk?
This Site Says, 'No Problem'
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
Like playing the stock market, but don't like losing money? Wish you
could buy shares of companies that only go up? Want to see stock prices
published a month in advance?
A new Web site operated from the
Caribbean says it can deliver all that, and
more.
Stock Generation (www.stockgeneration.com) bills itself as "a new way to
gamble on the Web." At the site, players can buy and sell shares of
imaginary companies in a virtual stock market where it seems making
money is a sure thing. "Profit without risk? No problem," the site says.
"Would you like to get rich quickly and absolutely legally? Then welcome
to SG!"
But the Web site is cloaked in anonymity, and it's impossible to verify any
of its lofty claims. What's more, potential players in the U.S. may want to
consult the law before they open accounts. States assert that collecting
winnings from online gambling is illegal, and efforts have been made in
Congress to clamp down on the companies that operate gambling sites.
To play Stock Generation's virtual stock
market, players must register with a credit
card, or send money directly to the Web site.
Players may then trade shares of 11 virtual
companies with names like "Golden Nuggets"
and "Fountain of Youth," whose share prices are controlled by the site.
The site says it aims for benign market conditions. "In the virtual world of
virtual companies ... everything is always stable and calm. There are no
disasters, no catastrophes here. Virtual companies doing virtual business
can never go bankrupt. Their virtual managers can never get involved in
any kind of financial scandals. They can be fully trusted. [Stock
Generation] is a real island of financial stability in our unstable world."
Most of the companies have share prices that fluctuate randomly, rising
and falling "like at an ordinary stock exchange," the site says. But for users
afraid of losing money, the site promotes its so-called privileged company.
This company's shares only increase (a solid 10% a month, the site says).
What's more, the share prices for the privileged company are published a
month in advance. The site says these guaranteed profits may not last
forever, but says if the 10% return is ever in jeopardy players will be
notified in advance so they won't lose any money.
"Play only with the ... privileged shares ... and you will never lose!" the site
says.
Stock Generation says it makes its money by charging a 1.5% commission
on every trade, and the site also profits from the spread -- the difference
between the bid and the ask price on its virtual market. Those profits help
subsidize the ever-climbing price of the privileged company, the site says.
It's difficult to find out who runs the Web site. The site's domain name --
its address on the Web -- is registered to Valver Kftarsasag in Budapest,
Hungary. Mr. Kftarsasag says he can't talk about the site or its owners
because he signed a confidentiality agreement with the company. He says
he does translating work for the company, and has placed some
advertisements for Stock Generation, but has nothing to do with its
operation. The Web site, meanwhile, didn't reply to numerous
electronic-mail messages that were sent seeking comment.
Stock Generation advertisements are now running on the popular Silicon
Investor stock-discussion Web site (www.techstocks.com). A spokesman
for Go2Net, which owns Silicon Investor, says the company hasn't
received any complaints about the advertisement. "Our policy is that if
there is something going on related to a business or client of ours that is
illegal we would immediately pull the advertisement," says Mark Peterson,
director of public relations for Go2Net.
Stock Generation says it is operated from the Commonwealth of
Dominica, a small island in the Caribbean home to about 71,000 people --
and several online gambling businesses. Regulators say the Caribbean is
known for hosting online gambling businesses.
"The problem with these types of games is that you are at the mercy of the
promoters as to whether the game is fair or fixed, and based on our
experience, most of the games are fixed," says Bill McDonald,
enforcement director for the California Department of Corporations. "And
like the old penny stock games, if you know the right people and get in
and out at the right time, you might make some money. But most don't."
Mr. McDonald says he isn't familiar with the Stock Generation site, and
declines to comment on it specifically.
Mr. McDonald says anonymity is one of the Internet's greatest dangers for
consumers, and says it's often impossible for individuals to get their money
back when they've been duped online by a foreign company. "My
investigative reach stops at the state line, and the [U.S. Securities and
Exchange Commission's] stops at the Atlantic and the Pacific," Mr.
McDonald says.
"The fact that someone in the Commonwealth of Dominica says this is OK
doesn't give me a lot of sense of security that my money is safe," says
Carolyn Ham, assistant attorney general in Minnesota.
It's not clear just how rich virtual investors are getting by playing the
market on Stock Generation. According to a list of big winners on the site,
James from "Forktown, USA," turned a $12,750 investment into almost
$1.6 million with just one trade. Kevin from "Fargo, USA," made more
than $500,000 in just over a month. And John from "Arizona, USA,"
parlayed his $240 investment into $240,730.
In most states, James, Kevin and John broke the law just by playing the
game, and they certainly broke the law if they accepted their winnings,
says Ms. Ham. "Obviously, the popularity of these things is exploding, so
people aren't deterred by the fact that it's illegal," she says.
It's impossible to know just how much is being wagered -- and lost -- on
gambling Web sites, but regulators estimate it's in the billions of dollars
each year. Cracking down on the games has been difficult, because almost
all of the companies operate from foreign countries.
State attorneys general believe that online gambling is covered by the same
laws that make other unsanctioned gambling illegal, Ms. Ham says.
Efforts to toughen the rules were made in Washington earlier this year. The
Senate approved a bill in July that would have meant stiff fines and jail time
for anyone who participates in or operates online gambling Web sites. The
proposal met opposition in the House of Representatives, but some have
vowed to revive it next year.
Write to Jason Anders at: jason.anders@news.wsj.com |
