SEC Crackdown On 'Net Scams

The Securities and Exchange Commission's new "cyberforce" filed its first cases Wednesday, charging 44 individuals with deceiving investors via the Internet.

The 23 separate cases involved spamming, posting messages on online bulletin boards or touting stocks on online newsletters or Web sites, said Richard S. Walker, SEC enforcement director.

Walker said the fraud mostly involved touting of microcap, or small company, stocks by individuals who were paid in cash or stock to recommend the shares. In every case, investors did not receive adequate disclosure of the payments, Walker said.

"Investors have the right to know if information is objective or whether someone is paying to provide that information to investors," Walker said.

In total, the 44 individuals were paid $6.2 million in cash and received 1.8 million shares or stock options to tout 235 microcap companies, Walker said.

"In all of these cases, the Internet promoters gave ostensibly independent opinions about microcap companies that in reality were bought and paid for," Walker said in a statement. "Not only did they lie about their own independence, some of them lied about the companies they featured, then took advantage of any quick spike in price to sell their shares for a fast and easy profit."

Among those named by the SEC was an Internet newsletter called The Future Superstock ("FSS"), written by Jeffrey C. Bruss of West Chicago, Ill. The company had been an advertiser on until July 22.

The SEC said Bruss and FSS failed to disclose more than $1.6 million in payments in stock or cash, failed to disclose that it had "scalped" or sold stock after recommending it, had lied about the success of previous picks and had lied about its independent research. The newsletter touted 25 companies.

Another online newsletter,, run by Steven A. King of Sarasota, Fla., touted five companies to its 200,000 subscribers, the SEC said. The SEC said King and his company were able to make a profit of $1 million by selling shares after recommending them.

In the case of John Wesley Savage and Princeton Research Inc., the defendants consented to a civil payment of $40,000 and a permanent injunction without admitting or denying the charges that they touted seven companies by spamming or sending unsolicited emails.

Another alleged spam operator, Francis A. Tribble and his promoting company, Sloan Fitzgerald, also consented to a civil penalty of $15,000 and a permanent injunction without admitting or denying the charges that they touted two companies in more than 6 million spams. Tribble and Sloan Fitzgerald were the subject of the largest number of complaints ever at the SEC's enforcement complaint center.

Written By Rex Nutting