Category: Fraud

It is not too late to sign up for the 2013 Pennystocking Conference in Las Vegas at the Hard Rock Hotel, run by Timothy Sykes. In fact, it is not even too late to use the early bird coupon code to save $400 (“EARLYBIRD2013” without the quotes). I will be speaking and I know that my talk will be good. If the other talks are half as good as mine the conference will be a great deal. I could say a lot more about how awesome it will be, but I’m not good at promotional verbiage and it isn’t my style. Even back when I had to pay for the conference I thought it was worth my time and money.

Sign up or read about the speakers

 

Disclaimer:  I have a close business relationship with Timothy Sykes (about which you can read all the details in my terms of use). I am a Profit.ly affiliate and will receive an affiliate commission if you sign up for the conference using my link. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Yesterday The Alkaline Water Company Inc. (WTER) had big trading volume of 1.9 million shares and at its high was up over 20%. Tim Lento noticed that and found the landing page for a promotion of the company at WTERReport.com. After he posted it the page was taken down. That website currently shows “under construction.”

Disclosed budget: “up to” $3,000,000

Promoter: Investech Equity and Francis Gaskins

Paying party: Investech Equity

Shares outstanding: 79,387,175
Previous closing price: $0.55
Market capitalization: $43 million

[Edit 2013-8-22]: Francis Gaskins / IPODesktop Premium now disclose that they were not compensated in the updated disclaimers. The old disclaimers will remain copied below for archival purposes. Previously, the disclaimer said, “IPODesktop Premium has received $15,000 from Investech Equity in compensation for this advertisement to enhance public awareness of The Alkaline Water Company Inc.” The current disclaimer is copied below. As to what this means, I do not know. Being involved in the promotion of a worthless pump and dump company looks bad to me whether an endorser gets paid or not.

 

Excerpt from disclaimer:

IPOdesktop Premium did not receive any direct compensation with respect to the writing of this online report and document. The stock was chosen to be profiled after IPOdesktop Premium completed due diligence on the stock. IPOdesktop Premium expects to generate new membership revenue, the amount of which is unknown at this time, it its paid website through the distribution of this online report and document.

…

Investech Equity has managed up to a $3,000,000 USD advertising production budget as of August 1, 2013 in an effort to build industry and investor awareness. Any funds leftover after expenses for research, overhead, advertising and public relations related to The Alkaline Water Company Inc. (ticker symbol WTER) will be considered profit. Entities related to Investech Equity hold a large amount of shares in WTER and intend to sell those shares. Their sales of WTER common stock will affect the value of your shares (negatively).

PDF copy of promotion page.

Embedded in the promotion page is this Youtube video of Francis Gaskins talking positively about WTER. The video was uploaded to Youtube on August 7th by someone who had not previously uploaded any videos.

New disclaimer:

Old Disclaimer:

 

[Edit 2013-8-19]: As of the middle of last week the WTERReport.com website was back up. I have since a few other websites promoting WTER. Looking at the other websites on the same server as WTERReport.com (using YouGetSignal). Below is a screenshot of the result, showing one defunct website (Garant.in) and one stock promotion website (MaverickReport.com).

I signed up for the MaverickReport.com newsletter and my confirmation email was from publisher@outoftheboxstox.com. The CANSPAM-required information at the bottom of the email revealed the sender to be “Investech Equity, Pacific Place, 1 Queens Road East, Admiralty, Hong Kong, Hong Kong.” I had run across a promotion by OutoftheBoxStox.com before so I looked through my emails to see what they had previously promoted. They previously promoted NGRC in September and October of 2012.

Below is a chart of NGRC. While the stock did have a nice move during the first pump it didn’t last that long and dropped big.

One of the problems (or benefits) of the internet domain name system is that changes take awhile to propagate. So if a change is made, different websites may display different information. That is the case with OutoftheBoxStox.com. While my favorite website didn’t display any other websites as being at the same IP as OutoftheBoxStox.com, DomainTools.com did; it showed MountStockMore.com as being hosted on the same server. Of course if I weren’t so cheap I would pay for a premium subscription to DomainTools.com or a similar website so I could see which websites used to be on the same server.

 

I then went to MountStockMore.com and signed up. The email signup confirmation page included a link to a BeverageInvestor.com profile of WTER. After looking at that website it is clear that it exists solely to promote WTER. A look at the disclaimer shows that it is exactly the same as the disclaimer at WTERReport.com.

BeverageInvestor.com disclaimer:

PDF copy of BeverageInvestor WTER pump page.

After looking that over it was time to go back through the steps I went through earlier on this new domain name:

 

That led me to EconomistTimes.com, which is of course reminiscent of other fake online newspapers such as FinancierTimes.com and ChicagoFinancialTimes.com (now defunct). A reference to The Economist Times could also be found in the disclaimer at the bottom of MountStockMore.com:

(click to enlarge)

A quick look at the home page of The Economist Times led me to the promotion page on WTER: http://www.economisttimes.com/wter_report/ Once again the disclaimer at the bottom is the exact same as that of WTERReport.com and BeverageInvestor.com:

PDF copy of EconomistTimes WTER pump page.

It seems that online promotions like this are getting more and more complex. It used to be that there would be a promotion website linking to a fake news article. Now we have multiple promotion websites linking to multiple different fake articles.

Besides the blatantly obvious WTERReport.com (that Tim Lento was the first to notice when it first went live), this promotion of WTER involves four different websites:
MaverickReport.com
EconomistTimes.com
BeverageInvestor.com
MountStockMore.com

[Edit 2013-8-22]: Search ads and display ads are now beginning to appear promoting WTER. Thanks to Tom McCarthy of PrePromotion Stocks for pointing this out.

Also, Outoftheboxstox.com has sent teaser emails indicating their next promotion will come on August 26th through August 30th (different dates to different emails). See the screen capture of the email below:

Disclaimer: [Edit 2013-8-22] I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

If you follow my Twitter this would not be news, but I have not previously blogged on this subject. For example, I tweeted about The Motley Fool removing a blog post from their website promoting Xumanii (XUII — disclosure: I’m short):

Blog post pumping $XUII quickly taken down by @themotleyfool “Jake Peacock” puts it up at @investingcom http://t.co/7D0vcSYsaN // I’m short

— Michael Goode (@goodetrades) June 10, 2013

Promotion Stock Secrets first wrote about a couple articles that had been commissioned by AwesomePennystocks on stocks they were promoting and about a blog post by a Forbes blogger, Tedra DeSue, promoting Swingplane Ventures (SWVI). Below is the text of her article on SWVI (available online here — the original article was taken down by Forbes).

This Company Has Copper Mining On Its Mind; Stock Moving On News
Demand for copper is falling, but that is not stopping one company from making bold moves to expand its processing of the metal.

Trading as a pink sheet stock, Swingplane Ventures Inc. (OTCBB: SWVI) sees there being significant opportunities for copper production on a property it has in Chile. Called the Algarrobo Property, Swingplane says there is considerable potential for production there high grade copper ore.
Company officials admit that production is currently limited because it does not have the proper license needed to sale ore. However, officials say they expect to have the license within a month. Once in production, Swingplane intends to acquire, through rent, lease and/or purchase, the necessary equipment, to increase production.

As it pushes to evaluate the potential for copper mining in Chile, the company is also dealing with concerns about its stock. Last week, it issued a note for investors saying it was aware of the volatility in the trading volume and price of its stock. Company officials are taking issue with a lot of chatter on Internet blogs and chat rooms that they say is not accurate.

In a statement released last week, it said its officers and directors are not “aware of any activity by stockholders or investor relations activity that may be the cause of this recent volume and price increase.” Specifically, the price reached almost $1 a share after trading at just under $.20 a share.

One of the world’s most recognized consulting firms in the mining industry has been contracted to assess the Algarrobo property.

At least one company is giving Swingplane good reviews. Awesome Penny Stocks notes that Swingplane is working with AMEC (AMEC International Ingenieria y Construccion Limitada) for an initial evaluation and report on the property in Chile. The consulting firm has been ranked two years in a row as a sector leader, which should bode well for Swingplane as it moves forward on its crucial mining effort. Amec is known for its work with companies like BP, Shell and the U.S. Navy.

As the company assures investors that its finances are strong, it must also deal with the fall in copper prices. The Wall Street Journal reported that the metal fell 5.4% this week, which was its work week since December 2011. The fall is due to China, the biggest buyer of copper, not buying as much of the metal.

I think that demand for the medal will pick up as the global economy recovers. As it does, the steps Swingplane is taking with its mining efforts in Chile will make it well-positioned as a company and a stock.
Not everyone has to stomach for over the counter stocks. If you do, you’re encouraged to take a hard look at this one. Some ideas include shorting the stock. As one investor said, to make money on the upside, get in early and get out early. You may be surprised that and happy about anything you make in between.

This article was distributed through the NewsCred Smartwire.
By Tedra DeSue for Forbes
Original article © Forbes

As was pointed out by someone (but I can’t remember who, because I think it was in tweets that were deleted), Tedra Desue has a website that links to a profile on eLance. Interestingly, there was a job posted on eLance that was for a Forbes article or blog post that she was hired for one day before she posted the positive blog post on SWVI. I am nearly certain that that job was for writing a pump article on SWVI (but it is possible though unlikely that this is just a coincidence). She was paid $250 for the article requested by that job. Unfortunately the person or entity that paid for the article deleted their account so it is not possible to see what other jobs they paid for. Below is a screenshot of the job.

Back in May The Motley Fool had a good article on how their site had been used to promote stocks by authors who did not disclose that they were paid to write positively about certain stocks. That article was reviewed in an article in the Columbia Journalism Review. That article was followed by Seeking Alpha’s mea culpa on their site being used to promote Goff Corp (GOFFE).

SeekingAlpha has indicated that they will change their procedures somewhat to reduce the possibility of stock promoters publishing articles on their platform:

How We Are Addressing Our Failure
First, we have conducted a review of the authors that posted these articles and for a variety of reasons in addition to this event, they will no longer be contributing to Seeking Alpha. It bears noting that we have no evidence that any of them were complicit in any illicit activity.

Second, we have reviewed our editorial processes and, as noted above, found them lacking. Therefore, we will be updating them as follows: First, in order to be included in an article, a stock will have to be trading at $1 or more per share AND have a minimum market cap of $100 million. If an article focuses on a single stock, we may make an exception in cases where we believe there is extreme value to our readers, and where the article provides deep, balanced research. While we recognize that a “one-size-fits-all” rule will inevitably impact our legitimate authors, our concerns over illegitimate stock promotions are such that we have to err on the side of caution.

But we will not stop there. In order to prevent inappropriate stocks being covered and potentially manipulated, when we receive an article on a stock that doesn’t meet the $1/$100 million threshold, we will conduct a secondary review to see if it is part of a paid promotion. You’ll forgive me for not sharing the precise review process in a public forum, but suffice it to say it will be robust. When questionable stocks are identified, submitting authors will be dealt with firmly.

Just two days ago, all these events were reviewed in an article for TheDeal.com by associate editor Bill Meagher. Below is an excerpt, including a couple quotes from me:

Jacob Wolinsky, who runs investment information website ValueWalk, said he was offered $1,000 to write an article praising Sunpeaks. Wolinsky said he was offered an additional $500 if he agreed not to disclose the payment, but refused the bonus. The article was published on Seeking Alpha in April 2012.

“I thought the guy who I talked to was just a shareholder who wanted some positive P.R.,” Wolinsky said in an interview. “I had no idea that there was a promotion going on. It was the first and the last time I did a sponsored story.”

Michael Goode, who has published almost 50 articles on Seeking Alpha, called Wolinsky’s article “yet another paid stock promotion on Seeking Alpha,” in a comment on the site. “SA has gone completely to the dogs over the last few years. It is a shame.”

Goode, a frequent investor and short seller in microcap stocks, said part of the problem with Seeking Alpha is there are so many contributors doing so many stories. “They let a lot of stuff go, and there is only so much they can do,” he said. “They are a lot better than they used to be.”

I do apologize for my contradictory remarks. I do think that SeekingAlpha has improved its editorial overview over the last few years but stock promoters and manipulators have been even better at evading the editors.

With SeekingAlpha, The Motley Fool, and Forbes becoming more vigilant the pumpers will likely go other places. With the current Awesomepennystocks.com pump Xumanii (XUII) I have seen them link to two positive articles on Investing.com that disclose no compensation but, knowing what I know now, I am almost certain that those authors were compensated.

Disclaimer: I am short 13,875 shares of XUII and have no position in any other stock mentioned above. I have no relationship with any parties mentioned above except that I talked to Meagher and am a contributor to SeekingAlpha. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Tim Lento first reported on the Inscor (IOGA) pump on May 30th, 2013 when a landing page promoting the stock went online at IOGAReport.com. It had been promoted by some crappy email stock promoters prior to that point. I am obviously late to post the IOGA pump here. Judging by the short length of the landing page, the high claimed budget, the company’s absurdly high market cap, and the early involvement of very poor pumpers, I believe that IOGA’s budget is a lie and that the stock will do very poorly. I am considering IOGA to be a top potential short. Ideally it gets some more volume first.

Disclosed budget: $2,000,000

Promoter: Arbitrage Wealth Report and Carson Smith

Paying party: Excelsior Partners

Shares outstanding:  272,258,554
Previous closing price: $0.62
Market capitalization: $168 million

IOGA unsurprisingly received a positive report from Goldman SmallCap Research (aka Robert Goldman shills for pumpers) on April 10th, 2013, for which he was paid $8,000 from a “third party”.

As a side note, this seems like the perfect pump and dump for the SEC to litigate based on Lowe v. SEC as Carson Smith and the Arbitrage Wealth Report do not appear to in any way shape or form have a bona-fide publication or regular and general circulation (or even the appearance thereof, as many promoters like Tobin Smith have). Instead it is a one-time tout sheet. From the Supreme Court’s decision in Lowe v. SEC:

The exclusion itself uses extremely broad language that encompasses any newspaper, business publication, or financial publication provided that two conditions are met. The publication must be “bona fide,” and it must be “of regular and general circulation.” Neither of these conditions is defined, but the two qualifications precisely differentiate “hit and run tipsters” and “touts” from genuine publishers. Presumably a “bona fide” publication would be genuine in the sense that it would contain disinterested commentary and analysis, as opposed to promotional material disseminated by a “tout.”

 

Excerpt from pump website disclosure (emphasis mine):

This paid advertisement by Arbitrage Wealth Report (hereafter “AWR”) does not purport to provide an analysis of any company’s financial position, operations, or prospects and this is not to be construed as a recommendation by AWR, or an offer to sell or solicitation to buy or sell any security. Inscor, Inc. (hereafter “IOGA”), the company featured in this issue, appears as paid advertising, paid by Excelsior Partners $2,000,000 to enhance public awareness for IOGA.

…

Endorsement is expressly limited to the following statement: “Assuming IOGA receives millions of dollars in fresh capital and hires outstanding management, capital gains are possible.” In addition, all references to “analysts” refer to analysis and research undertaken at www.goldmanresearch.com and has not been independently reviewed or verified

 

Pump website disclosure:

IMPORTANT NOTICE AND DISCLAIMER: This paid advertisement by Arbitrage Wealth Report (hereafter “AWR”) does not purport to provide an analysis of any company’s financial position, operations, or prospects and this is not to be construed as a recommendation by AWR, or an offer to sell or solicitation to buy or sell any security. Inscor, Inc. (hereafter “IOGA”), the company featured in this issue, appears as paid advertising, paid by Excelsior Partners $2,000,000 to enhance public awareness for IOGA. Although the information conAWRned in this advertisement is believed to be reliable, AWR makes no warranties as to the accuracy of any of the content herein and accepts no liability for how readers may choose to utilize it. The information conAWRned herein is based exclusively on information generally available to the public and does not contain any material, non-public information. Readers should perform their own due-diligence before investing in any security including consulting with a qualified investment advisor or analyst. Readers should independently verify all statements made in this advertisement and perform extensive due-diligence on this or any other advertised company. Endorsement is expressly limited to the following statement: “Assuming IOGA receives millions of dollars in fresh capital and hires outstanding management, capital gains are possible.” In addition, all references to “analysts” refer to analysis and research undertaken at www.goldmanresearch.com and has not been independently reviewed or verified. Neither Carson Smith nor AWR has performed independent due diligence on IOGA. AWR may also receive new subscriber revenue and mail list rental, the amount which is unknown at this time, as a result of this advertising effort. AWR nor any of their principals, officers, directors, partners, agents, or affiliates are not, nor do we represent ourselves to be, registered investment advisors, brokers, or dealers in securities. AWR is not offering securities for sale. An offer to buy or sell can be made only with accompanying disclosure documents and only in the states and provinces for which they are approved. Research and any due diligence were conducted by an outside researcher for this advertisement. Further, specific financial information, filings and disclosures as well as general investor information about publicly listed companies and other investor resources can be found at the Securities and Exchange Commission website at www.sec.gov and www.nasd.com. Any investment should be made only after consulting with a qualified investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Many states have established rules requiring the approval of a security by a state security administrator. Check with www.nasaa.org or call your state security administrator to determine whether a particular security is licensed for sale in your state. This advertisement is not intended for readers in any jurisdiction where not permissible under local regulations and investors in those jurisdictions should disregard it. Investing in securities is highly speculative and carries a great deal of risk, which may result in investors losing all of their invested capital. Past performance does not guarantee future results. The information contained herein contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding expected continual growth of the featured company. Forward-looking statements are based upon expectations, estimates and projections at the time the statements are made and involve risks and uncertainties that could cause actual events to differ materially from those anticipated. Forward-looking statements may be identified through the use of words such as expects, will, anticipates, estimates, believes, or by statements indicating certain actions may, could, should, or might occur. Any statements that express or involve predictions, expectations, beliefs, plans, projections, objectives, goals or future events or performance may be forward-looking statements. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the publisher notes that statements contained herein that look forward in time, which include other than historical information, involve risks and uncertainties that may affect the company’s actual results of operations. Factors that could cause actual results to differ include, but are not limited to, the size and growth of the market for the company’s products and services, regulatory approvals, the company’s ability to fund its capital requirements in the near term and the long term, pricing pressures and other risks contained in the company’s reports filed with the Securities and Exchange Commission. Arbitrage Wealth Report is a trademark of Carson Smith. All other trademarks used in this publication are the property of their respective trademark holders. AWR and Carson Smith are not affiliated, connected, or associated with, and are not sponsored, approved, or originated by, the trademark holders unless otherwise stated. No claim is made by AWR or Carson Smith to any rights in any third-party trademarks.

PDF copy of pump page.

 

Disclaimer: I have no position in any stock mentioned above and no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Last Friday, @StockBrainiac (run by Equities Awareness Group) tweeted about an upcoming hard mailer promoting Dephasium Corp (DPHS).

$DPHS hard mailer dropping over the weekend. I’ll be long Monday

— Stock Brainiac (@StockBrainiac) May 31, 2013

Over the weekend a few crappy stock promoters pumped the stock.

LiquidTycoon has agreed to be compensated fifteen thousand dollars for a one day public awareness marketing campaign for DPHS from the third party StockMister LLC.

The same promoter that runs that website runs the following websites:

PennyStockMoneyTrain.com
PennyStockPickAlert.com
SuperHotPennyStocks.com
SuperNovaStockPicks.com
LiquidTycoon.com
TheInformedStockInvestor.com
WinningPennyStockPicks.com
TheStockPickingMoneyTree.com
WePickPennyStocks.com
WallStreetNewsRelease.com

DPHS was also promoted by Joepennystocks.com / PennyPickAlerts.com:

 JoePennyStocks has been compensated $15,000.00 USD by StockMister LLC for a one day Awareness Campaign on DPHS

And by Openingbellreport.com:

Compensation: We have been compensated up to $35,000 for this publication by DesignIRFirm.

This morning prior to the market open someone sent me a link to http://www.penny-mailers.com/mailers/DPHS_mailer_3rdjune.jpg using my contact form to report that they received a hard mailer on DPHS. I was immediately suspicious, especially after seeing that the website that image was hosted on was just registered on May 22nd. Furthermore, a look in the directory showed many different file names for the same image:

Also, the font was off in some places — the “x” in “next” was weird and the “u” in “huge” was in italics while the rest of the word was not.

I tweeted my suspicions prior to the market open:

some guy linked me to bit.ly/11QTvm8 but why all this? bit.ly/11QTw9L something very fishy. Font looks off in places $DPHS

— Michael Goode (@goodetrades) June 3, 2013

I took to Twitter to see what else people were saying and found this:

We’re ignoring $DPHS! Look at this penny-mailers.com/mailers/DPHS_b… …, then look at this i.imgur.com/ErgDoyL.jpg– Notice anything fishy?

— Penny Stock Rumors (@pennyst0ckrumor) June 3, 2013

The purported mailer of DPHS looked a lot like the LOTE mailer. I became convinced that the purported hard mailer was fake. Tim Lento then posted in the TimAlerts chat that

 

The fold marks were the exact same as those in the LOTE hard mailer that Tim Lento had uploaded over a month ago; the purported DPHS mailer was just a Photoshopped version of the LOTE mailer. Here is a close-up that proves the DPHS mailer is a fake (see the zoomed-out comparison):

 

Even without the original LOTE image to compare the DPHS image to, it would still be possible to ascertain that the DPHS image was faked, by using image error level analysis. Take a look for yourself.

Here is a small piece of the DPHS image:

The lighter areas show a different level of image error compared to the darker errors, indicating that they came from different sources. Different colors in the original will affect the image error level analysis so it is only in sections of the same color and font where differences in the error level image are meaningful.

How I will trade DPHS

Fake stock promotions consistently do much worse than even real stock promotions, so I am short biased on DPHS. That being said, there is bid support on the stock that has gotten partially filled (the bids were not pulled when they were about to be tested) which means that someone is trying to support this and not just sell as much stock as possible as quickly as possible. Consequently, I will not look to short this aggressively. But I still won’t even consider buying it.

[Edit 2013-6-3 8:00pm EST]: Multiple people have posted photos of a real hard mailer that hit today promoting DPHS. But even this mailer, while real, is still fake, because it says that it is from AwesomePennyStocks and that they will promote DPHS to their email list on Thursday. Here is a photo that was posted to iHub. I am quite certain that this is not from AwesomePennyStocks (APS) or anyone affiliated with them. They have continued to email promoting XUII. I have taken advantage of the confusion though by selling short XUII overnight and holding DPHS long overnight (both positions will likely be closed soon after the open tomorrow). The mailer directs people to www.pre-mailer-alerts.com which was registered on April 25th, has a design very much like APS’ website Premiumstockreport.com, and was registered to Maria Morales of Costa Rica. APS’ current legal entity is Degroupa Tenner Morales Media. I think it quite likely that someone is having quite a bit of fun pretending to be APS.

[Edit 2013-6-4 8am]: I am wondering if the new APS mailer was even sent out in the mail. I would expect more people to have received it if it had been sent. Maybe it is another fake.

 [Edit 2013-6-13]: The real hard mailer sent out promoting DPHS (from here):

Disclaimer: [Edit 2013-6-3 8pm EST – I am long DPHS and am short XUII shares; both positions will likely be closed early tomorrow morning.] I have no position in any stock mentioned and I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.