HOT STOCK TIP, ANYONE?
The Case of the
Phony Faxes
11/20/06
Fax
machines around the nation were humming the
week before Christmas '04, with a series of
mysterious messages spitting out by the tens
of thousands.
Anyone
who bothered to take a close look at one of
the faxesand plenty apparently didnoticed
something strange. The message was addressed
to a "Dr. Mitchel" and came from
a financial planner named simply "Chris."
Clearly the wrong number.
But
the message itself was intriguing. It
was all about a hot stock that "Chris"
wanted the good doctor to buy immediately.
One of the mystery faxes went like this:
Was
it really an errant fax containing a piece
of potentially lucrative advice, like some
holiday gift from the heavens?
Many
people apparently thought so. Soon after
the mystery fax hit the airwavesDecember
17shares of IFLB (Infinium Labs, a video
gaming company now called Phantom Entertainment)
started rising. The first day the stock jumped
96 percent. Four days later, it was up 160
percent and trading at six times its December
16 volume. Two other stocks mentioned in alternate
versions of the faxData Evolution and
Soleil Filmsaw similar increases.
The
happiest holiday of all, though, may have
belonged to Texas stock promoter Michael O.
Pickensson of billionaire oil tycoon
T. Boone Pickens.
Turns
out, there was no "Dr. Mitchel,"
no "Chris," no "Linda,"
and no stock tip. It was all a ruse. The scheme
was simple: snatch up shares of the penny
stocks while prices were cheap, blanket the
nation with faux faxes, and pocket a tidy
profit after the prices rose. It all worked
according to plan: in less than two months,
Pickens' affiliated companies made some $386,000
on just two stocks.
But
one thing he didn't figure on: getting caught.
The press got wind of the faxes and published
stories, which caught the eye of the Securities
and Exchange Commission, or SEC. The SEC opened
an investigation, tracing the fax calls to
a Florida company, and we soon began investigating
as well. We conducted interviews, searched
computers for evidence, and gained enough
information to arrest Pickens, who was charged
by prosecutors along with a fellow stock promoter.
On
October 30, Pickens pled guilty to three felony
counts of securities fraud. He faces up to
twenty years in prison when sentenced on January
30.
How
can you keep from being duped by such a scam?
A few suggestions: