Froste Byte Boiler Room:
New York, March 16 (Bloomberg) -- All the press devoted to the productivity miracles of the New Economy has overlooked one industry.
The high-tech stock manipulation business.
In the old days, penny-stock cons had to work for their money. There was the hassle and expense of setting up a boiler room, hiring and training a collection of recent college grads and investing in phone networks to dial unsuspecting suckers. To say nothing of the expensive lawyers to defend themselves once the regulators caught on.
Today, though, the principals of defunct boiler rooms like Stratton Oakmont of Lake Success, New York, no doubt are kicking themselves as they watch a new generation mimic their success with none of the muss and fuss of office leases, weekly payrolls and telephone banks.
''Why would you dial up one person at a time when you can reach 60 to 70 million with a few keystrokes?'' muses Bill McDonald, assistant commissioner of the enforcement division at the California Department of Corporations.
The new-style scam: ''traders'' pages on the Internet, where anonymous hypesters can tout their stocks with high confidence that not even the regulators can find them.
Most recently, investors have been falling for the Web hype coming from a site called bigtrades.bizhosting.com, though the touts don't sign their names and there is no way to inquire about them.
Bigtrades.bizhosting, in turn, has been talked up on several Internet discussion groups with the effect of whetting investors' appetites about questionable investments, and the efforts to get the word out on bigtrades.bizhosting's influence has paid off.
The Latest
A tout yesterday caused a surge in volume and price of Omni USA Inc., a maker of gear drives and trailer-towing components. Michael Zahorik, executive vice president at Omni USA, said, ''I couldn't tell you'' what prompted the action.
Investors who try to divine the identity of these latest touts will reach nothing but dead ends. A ''pump and dump'' operation using the Web to supplement its ''marketing'' plan? A more modern hype in which a promoter facilitates big shareholders who want to get rid of some inventory? Bigtrades.bizhosting leaves it all to the reader's imagination.
The Omni USA rally was not the first time an officer of a public company would be professing to know nothing about an unprecedented spike in the shares of his company inspired by this Web site.
Scott Halperin, chief executive officer of Saratoga Brands Inc., a specialty food importer that trades under the symbol STGA, commented that he was unaware of the existence of bigtrades.bizhosting until after shares of his company soared 47 percent within minutes of a 3:30 p.m. recommendation of Saratoga on the Web page on March 9.
Fast Move
Halperin says he was just completing a physical examination by an insurance company doctor late that day when he turned on his computer and saw a stock price so unbelievable that he figured ''something messed up the data.'' Still, he didn't stay in the dark all that long: before the day's close minutes later, he says he managed to sell 10,000 shares.
(Saratoga wound up closing at the same 94 cents a share where it had closed the previous trading day. But volume on March 9 was 957,100 shares, up from a more typical 11,400 the day before).
Another bigtrades tout, Microwave Filter Co., rose from $1.125 to $3.25 after a 3:30 p.m. tout on March 8, only to close at $2. Volume soared to 248,100 shares from 1,000 shares on the previous trading day. It closed at $1.13 yesterday.
''We don't have any reason why the activity was, or what it was,'' said Dick Jones, chief financial officer of Microwave Filter, a maker of electronic filters for radio and microwave frequencies. Jones said he had not heard of bigtrades.bizhosting. While Jones said on March 11 that ''we're looking into it,'' he added that the company hadn't yet searched Internet discussion groups to see whether Web hype had played a part.
Telegraphed
Yet the movement in Microwave was discussed on at least two discussion sites on Go2Net Inc.'s Silicon Investor last week, including a site devoted to Microwave Filter. ''Yesterday's action in MFCO was obviously a day trader scam and had nothing to do with the value of the company,'' wrote one message poster in the Silicon Investor group ''Post Your Short Term Picks.''
There is no biographical material about the person or persons behind bigtrades.bizhosting on the Web site. Bloomberg sent e-mails to the ''Webmaster'' of the page, but got no response. A search on the Internet to determine the owner of the site brought Bloomberg to Marketing Allied Services of Salt Lake City, a company whose Direct Connect subsidiary gives out free Web pages ''to anyone who would like one,'' according to Mike Handy, who is in charge of handling complaintsabout such problems as pornography and ''spam'' e-mails on the pages. Handy says that, like Direct Connect's hundred or so competitors, his company doles out Web pages without asking for telephone numbers or names, and in exchange gets to run advertising on the users' Web pages. He knows only the e-mail address and an Internet identification known as the ''IP'' address of those users, neither of which he will divulge.
No Call He was willing to say, though, that bigtrades.bizhosting has been around since March 5, and that he had not been contacted by the Securities and Exchange Commission with regard to the bigtrades site. It's surprising that he hasn't since another Web page registered with Direct Connect's parent company seems to have run into regulatory trouble. A page that's called bigtrade -- singular -- .bizhosting is publishing nothing but a full-screen message saying, ''The bigtrades website has been suspended as per investigation by the United States Securities and Exchange Commission.'' Despite the mysterious shutdown of a page with a nearly identical name to the bigtrades (plural) page that's still in operation, an SEC spokesman said he knew of no action against bigtrade or bigtrades.
HiSpeed and Skycat Several people who seem to know at least something about bigtrades, though, are Internet message posters who go by the names HiSpeed, jeff Strum and Skycat. HiSpeed wrote on the Silicon Investor message board ''Tiger Investor'' at 4:20 p.m. March 8 that ''This site rocked today,'' posting the address of bigtrades.bizhosting.com. He was back in action on another Silicon Investor message board ''Short Term Picks From the Whiz Kid'' at 12:05 a.m. on March 9, noting that he'd been impressed by bigtrades, again posting bigtrades' e-mail address. By 8:42 a.m. on March 9, jeff Strum was posting the bigtrades e-mail address yet again on the Whiz Kid board, noting the big run-up followingthe previous day's recommendation, and that a new tout was expected at 3:30 that afternoon. At 5:36 that evening, Skycat would be telling jeff Strum that he was right about bigtrade's power, but that ''all should be careful'' because the picks tanked as quickly as they soared.
That didn't stop Skycat, though, from praising the page hours later on the Saratoga Brands discussion group on Silicon Investor, where he said there might still be hope for a good price on Saratoga, given that day's rally. HiSpeed talked it up yet again on March 10 on the discussion page ''Tiger Investor,'' saying, ''Their pick rocked on Monday but Tuesday pick fizzled rather quick. But that one did have 2x float of first one, too.'' Neither bigtrades nor bigtrade -- its similarly named cousin with the ''suspended'' per SEC notice -- returned e-mails from Bloomberg. Bigtrades, plural, though, did add a little something to its disclaimer over the weekend, which might suggest some awareness of regulatory risk to which it's exposed. ''Investors are urged to analyze the movement and behavior of previously profiled stocks,'' it wrote -- a ''full disclosure'' legal cover it might use as protection in the event regulators can track the hypesters down.
The suspicious spikes in their touts may be news to the rubes following their advice to buy. But smart money says that the lucky sellers didn't need any help understanding the bigtrades game.
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