Agoracom

Courtesy of Matt Cutts via Twitter

The U.S. Department of Justice has confirmed that Edward “Eddie” Davidson, 35, a notorious pump-and-dump spammer sentenced to 21 months in a federal prison, has escaped from the minimum security facility in which he was serving his time and is currently being pursued by the FBI, IRS and Colorado law enforcement agencies.

Davidson was a mastermind behind a large-scale penny stock pump-and-dump scam effort propagated via spam e-mails. After buying penny stocks and sending massive spam campaigns espousing some reason or other for people to buy the securities, he would sell his shares at a profit once the involved stocks had risen.

Altogether Davidson provided spammed messages for approximately 19 different companies. Read the full story here.

Oh, boy. Looks like I better tune up my spam filters

UPDATE: Sad ending to this story.  On top of being a cowardly spammer, he turned into a cowardly murderer by taking the life of his wife and 3-year old child before taking his own.  Very sad that he couldn’t just take himself.

When are they going to learn? The SEC issued the following press release, which is summarized as follows:

The Securities and Exchange Commission today charged 11 individuals and three companies, alleging they conspired to illegally issue and sell unregistered stock in a purported diamond and gold mining company and lined their pockets with more than $64 million from 40,000 investors nationwide.

Also of note was the following quote:

Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement, said, “The perpetrators of this massive scheme include several securities professionals and an attorney. Today’s action demonstrates that we will aggressively pursue individuals who ignore their obligations as gatekeepers to our markets and instead collude with their clients to violate the federal securities laws.”

Guys, give it up.  The SEC is cracking down and taking names.  Time to start using some real IR tactics that actually get results and don’t land you in jail.

Final point of interest:

The Commission acknowledges the assistance of the Financial Industry Regulatory Authority (FINRA) and the Saskatchewan Financial Services Commission in this matter.

Saskatchewan? Way to go rough riders in helping bring these scammers to justice!

If you want to read about other scams we’ve been tracking, have a look at our stock scams section of the blog.

Regards,
George

The following is an actual alert generated by AGORACOM for Canadian Small-Cap CEO’s. It is not a prank. Please read the message below and pass it on to colleagues. We have uncovered a financing scam taking place in Toronto, which may very well be taking place in other Canadian cities as well.

It has come to our attention that at least 8 Canadian Small-Cap CEO’s in the resources sector have become actual or potential victims of a scam.  There are probably many more, as response to this alert grows everyday.

THE SCAM

CEO’s are contacted under the auspices of a massive financing from a private high-net worth investor that wished to remain anonymous until meeting with the company in person.

A meeting is arranged at the Exchange Tower (or 20 Bay Street), where each of the CEO’s were taken to an unmarked suite. The “investor” suffers some kind of a mishap at the last second and can not attend the meeting. In the meantime, attendees of the meeting are engaged in a poker game and invite the client to sit down and play a high-stakes poker game.

CEO’s that refuse to participate are faced with high-pressure tactics to coerce their participation. Without being specific, we can verify that over $30,000 has been scammed so far.

We do not believe this is a coincidence and are now warning all of our clients and colleagues to stay away from any such invitation to meet undisclosed investors at the Exchange Tower, 20 Bay Street or any other location. If an investor is serious about financing your company, ask them to meet at your offices.

This is not unique to AGORACOM clients, nor do we believe it is unique to Toronto. As such, please forward this message to all of your colleagues and peers as soon as possible, including media contacts. We need to get this message out as fast as possible.

If you have been a victim of this scam, please advise us as soon as possible, as we are considering the involvement of the RCMP.

UPDATE: We received numerous phone calls from clients and non-clients within minutes of sending out the message. Here are the highlights:

• It looks like 20 Bay Street is now another location being used by the scammers.

• One person remembers a similar scam taking place years ago but can’t believe they have the guts to pull it off in the Exchange Tower today.

• Another CEO advised the scammers that he was bringing along his IR person to the meeting. The scammers asked him to come alone but the CEO insisted. The scammers canceled the meeting the next day.

• Another CEO was propositioned but advised he did not require financing at this time.

• Another CEO accepted the invitation and met with the group. The meeting took place at 20 Bay Street. Walked into the room and a game was taking place with $100 bills in a suitcase on top of the table. While they waited for the investor, the scammer that arranged the meeting joined the table and began playing. Within a couple of minutes he received a phone call and asked the CEO to “play my hand”. CEO said he didn’t want to be responsible for his money. Scammer said “no problem”. Within 10 minutes he was up $1,000. The scammer came back to the room and thanked the CEO. Gave him $500 as a “thank-you” and asked him to play along with them. Within a few hands, CEO was up $1,500. CEO got up to leave as he knew something was up. They asked him to play a couple of more hands. Next hand he was dealt a full-house. Rules of the game required holder of pairs to double the pot. He now knew this was a scam and folded his hand, giving back the entire $1,500. They offered to give him IOU but he left quickly. He had won 80% of the hands until that point.

UPDATE #2: Just received e-mail from a CEO that was contemplating meeting with the scammers on Wednesday. Now that he knows who they are, he cancelled. Have to love the speed of Web 2.0!

UPDATE #3: Just received another call from someone that received a call from the scammers. Looks like they are still going strong.

Regards,
George

A loud round of applause please to the SEC for suspending trading in 3 more companies that haven’t adequately disclosed information to investors and have been the subject of both spam e-mail campaigns and promotional videos on YouTube.

The action warrants even further commendation when you consider the SEC probably has its hands full with major Wall Street problems related to the sub-prime debacle.

This isn’t the first time we’ve applauded the SEC for taking action on this very important issue that we are very passionate about ourselves. We consider stock/fax/mail spam a scourge on the industry because it inundates investors with unwanted solicitations, while also hurting the reputation of the small and micro-cap markets.

HIGHLIGHTS OF SEC PRESS RELEASE

The SEC issued a press release with the full details but here are the highlights:

1] The SEC identified the three companies as:

• NeoTactix Corp. (NTCX - OTCBB)

• Graystone Park Enterprises Inc. (GPKE - Pink Sheets) and

• Younger America Inc. (YNGR - Pink Sheets)

2] Trading in the three companies’ shares has been suspended for 10 business days and won’t resume until April 4.

3] “The videos often repeat information in the companies’ press releases and are posted to coincide with traditional spam e-mail campaigns.”

4] Each of the companies “inadequately disclosed its assets, business operations and financial condition.”

SEC ANTI-SPAM INITIATIVE HAS NETTED 50 COMPANIES, PROMOTERS, SPAMMERS AND INSIDERS

The SEC used the press release to also bring the public up to speed on the effectiveness of its Anti-Spam Initiative. You’ll be happy to know that more than 50 companies have had trading in their securities suspended and the SEC has brought several enforcement actions against the perpetrators behind these companies.

The Result? Spam complaints are down 68% in just one year, from 167,000 to 54,000. Like me, I’m sure you’ve also seen a drastic reduction in the amount of stock spam in your daily inbox (thank god).

CONCLUSION

It’s nice to know that complaints aren’t going into some black hole and collecting cobwebs. The SEC is obviously taking this matter very seriously, so you should do all you can to assist them and eliminate this scourge on our markets once and for all. If you have a complaint, make sure to send it to: enforcement@sec.gov

Regards,
George

UPDATE: Footnoted.Org (a great blog that reports on the fine print footnotes in SEC filings) has some more details about the video hostess and company behind this latest SEC press release. Interesting stuff.

Despite SEC Operation Spamalot vowing to crack down on stock spam, it appears the people at Twin Trader contnue their spam attack undaunted. So far this week I’ve received 8 separate spam messages discussing 7 different companies. Even if I was a legitimate subscriber to the service, how valuable can the service be when you send information about 7 different companies?

A closer look at their disclaimer uncovers the typical we might own a bunch of stock and sell it at anytime even if it avalanches the stock warning. What I also find particularly interesting is the following:

“TT has been compensated five hundred dollars from Inside Wall Street for disseminating this news release and other services” 500 Hundred Dollars? Either TT is selling its spam services short, or they are a related party in which IWS is the company selling the services and TT is conducting the spam operations.

Either way, I didn’t ask for 8 stockspam messages and a report will be filed with the SEC. If you’ve been spammed by TT, I suggest you contact the SEC or e-mail them directly at enforcement@sec.gov

Regards,
George

Good morning to you all. On behalf of AGORACOM and everyone we know in the small-cap space, we applaud and thank the SEC for its announcement yesterday. As an advocate of legitimate small-cap companies across North America, we have done our part in drawing attention to this very serious problem which is tainting an entire industry of legitimate small and micro-cap companies that do not engage in such practices.

To this end, I gave a keynote speach on this very matter at the PIPEs Conference in New York this past November, titled “E-Mail Promotion Is Dead - How To Conduct Great Investor Relations In A Web 2.0 World” in front of more than 100 investment bankers. Reaction to the speach was so positive tha we made it available by webcast for everyone to view:

We hope this is just the beginning of things to come out of the SEC.

Best,
George

Zac Bisonette has a great article on bloggingstocks about pump ‘n dump promoters using YouTube as another avenue for stock promotion. The most imporant, however, is that tactics such as e-mail spam, direct mail and telephone boiler rooms are no match for some simple due diligence - check the SEC litigation database by running names of companies, officers and directors through it. In just a couple of minutes, you’ll go a long way towards determining whether a possible investment is just another scam.

By the way, here is the “AGORACOM” search result under SEC litigation. One of the rare instances I can be proud of seeing “No documents matched your query.”

Regards,
George

P.S. YouTube can be used for legitimate stock marketing purposes. AGORACOM will be unveiling a YouTube profile just in time for PDAC 2007 and posting interviews with analysts, executives and attendees for the benefit of those who can’t make it to the biggest mining conference in the world

Good morning. Despite vast sources of education and research on the web, staggering amounts of money are being invested and lost in scam stocks. This space is a great one to invest in and profit from if you use some common sense techniques, however, many investors are still treating investments like the craps table at Bellagio and just laying down bets without much thinking involved. My anecdotal research tells me much of this can be attributed to just plain laziness.

As such, here are 7 sure fire techniques to help you spot and avoid a scam stock in under 5 minutes:

1. Filing Financial Statements - Good companies file quarterly and annual financial statements with the SEC (www.Edgar.com ) or OSC (www.SEDAR.com). If you have found a company that doesn’t file, run.
2. Bad People - People who run pump and dump scams usually have a history of doing so. Take 5 minutes to Google officers and directors of any small/micro you are planning to invest in. Add on terms such as “fine” “penalty” “complaint” to improve the result. If someone pops up, run.
3. Commercial Acceptance - If a company is achieving $1,000,000 in annualized revenues, then they have achieved commercial acceptance and stand a good chance of creating a good company. Less than that and they haven’t proven themselves yet. It doesn’t mean the company is necessarily a scam but it does mean you are running the risk they never get sales off the ground.
4. Stock Spam - If the company is engaged in stock spam, then chances are you have just run into a pump and dump. Check sites such as SpamNation which reports on stock spam on a daily basis. One caveat, there are several occasions when companies are unknowingly spammed by investors who have taken a position in the open market and trying to promote it via spam. Check and see if the company has issued a public statement disavowing any connection to it.
5. Sniff Test - A big part of investing in this space is common sense. This is due to the fact very little media and analyst coverage exists in the space for investors to rely on. As such, you need to run the following sniff tests. First, if a company is introducing a “revolutionary” product, is it something you would buy and do they have the cash in the bank to market their product? If the company is introducing a better mouse trap, will they be able to carve out market share from existing players? On this latter point, refer to point #3 above. If they have achieved commercial acceptance, than they have a good chance of multiplying their business.
6. Market Capitalization - This is a simple one. Multiply the company’s outstanding shares by its share price and you get the company’s market valuation. If it is $100 million with only $100,000 in sales, run.
7. Spiking Stock Chart - If the company has a chart that looks like a hockey stick over a short period of time (i.e. less than 30 days) on dubious news, you’ve run into a stock promotion and will be left holding the bag. The caveat here is for companies that have achieved that stock run on good, real news (big customer order, big discovery, etc.)

The small/micro-cap space is a great place to make phenomenal gains on up and coming companies. Use my 7 tips and you should prosper for a long time to come.

Best,
George