PennyStockChaser Hides Profits, Secrets from Investors
by Melissa Davis - 11/16/2009 1:16:30 PM
* Click here to start/join a discussion on this article or supply tips for future stories.
This June, shortly after PennyStockChaser announced that it had become the most popular website for “hot penny stock tips” in the business, the Internet-based tout sheet began dropping a familiar name that once carried considerable weight on Wall Street.
It listed Mike Schonberg – a name formerly attached to such legendary investment firms as Dreyfus and UBS – as its official contact person. Keeping with its secretive nature, however, the website stopped well short of offering any details about Schonberg’s professional background.
If Mike Schonberg is the same “Michael L. Schonberg” who tainted Dreyfus by investing client funds in risky penny stocks a decade ago – a likelihood that The Street Sweeper spent the past week trying to prove – PennyStockChaser may have kept its mouth shut for good reason. After all, Schonberg left Dreyfus with a reputation for using investor funds to pump up worthless penny stocks that he owned and ultimately sold.
PennyStockChaser appears to engage in similar practices. Already, during just seven months of operation, the young website has collected almost 200 million free trading shares in microcap companies that it was paid to tout. Although PennyStockChaser fails to disclose whether it has already sold those shares – shunning a practice adopted by more transparent firms – it could have scored millions by selling some of those pumped-up stocks before they crashed and left ordinary investors with big losses.
In early August, for example, the website highlighted Atlantic Wind & Solar (AWSL) – a company with no revenue, few employees and an “office” that apparently belongs to UPS – in one of its featured profiles. Shares of AWSL, which fetched 84 cents on the day of that report, rocketed toward $5 over the next few months before reversing course and losing serious ground. PennyStockChaser received 140,000 free shares of AWSL – worth $675,000 at their peak – for its favorable coverage.
Timothy Sykes, a former hedge fund manager with a keen eye for penny-stock fraud, suspected blatant hype and shorted 3,000 shares of AWSL ahead of its recent plunge.
“I still expect the stock to fall 50% to 90% from its pumped-up highs, in accordance with other PennyStockChaser pump and dumps,” Sykes wrote in a blog on his official website. An “SEC (Securities and Exchange Commission) halt is also possible … I’ve predicted three SEC trading halts in a row – GVBP, EMGE and SPNG – and this one is waaaaay up there as the next potential halt.”
The Pink Sheets, an exchange known for its lenient listing standards, actually stopped publishing price quotes for AWSL – and issued a “buyer beware” notice for investors – due to potential dangers associated with the stock. Even so, AWSL still sells for around $3 a share, making it one of the biggest gainers on PennyStockChaser’s “Past Winners” list despite its recent fall.
Trailer Park Trash?
Several of the stocks on that list fetch even less now than they did when PennyStockChaser first started promoting them.
Take Precision Petroleum (PPTO), for example. An early favorite of PennyStockChaser, touted when the website was still brand-new, PPTO portrays itself as an independent energy company focused on exploration and development opportunities throughout North America. According to PPTO’s latest quarterly report, however, the company has never generated any revenue and has just $1,316 in the bank to finance its big plans.
Like AWSL, regulatory filings show, PPTO also lists an odd address for its headquarters. Based on Internet-based satellites, that address appears next to possible outbuildings or mobile homes – on a barren piece of land – in a tiny Oklahoma community known as “Slaughterville.”
Nevertheless, PennyStockChaser wholeheartedly endorsed the company during repeated touts this spring. With PPTO rising to 86 cents a share in early May (but still down from the $1.50 it originally fetched three months earlier), PennyStockChaser described the stock as a target of short sellers that would soon “skyrocket” on positive news and intense buying pressure.
“We talk to PPTO management,” PennyStockChaser stated in a press release focused on the stock, “and they tell us to expect more good news in the coming days and weeks.”
PennyStockChaser then directed investors to (now-broken) links for press releases, hosted by a site called launchyourcampaign.com, about PPTO’s promising future. One day later, PennyStockChaser again touted PPTO and insisted that investors “should really read the PRs” located at launchyourcampaign.com for more information about the company’s potential. By doing so, PennyStockChaser treated those press releases almost like independent sources.
Based on Internet searches, however, PennyStockChaser and launchyourcampaign.com shared the same Internet Protocol (IP) number – typically linked to a single computer – until the latter site suddenly disappeared.
Missed Connections
Meanwhile, PennyStockChaser has gone on to promote companies with some intricate connections of their own.
AWSL stands out as a prime example. In its regulatory filings, AWSL lists Gilles Trahan as the chairman of its board. Another penny-stock company, MSE Enviro-Tech (MEVT), claims Trahan as its chairman as well. Over the course of the past few years, both AWSL and MEVT have retained Geneva Bancorp – which previously employed Trahan as its top officer – to provide investor relations services for their companies. Depending on the press release, Trahan can be found touting the prospects of MEVT on behalf of either Geneva Bancorp or the company itself.
As the firm hired to manage investor relations for AWSL and MEVT, Geneva Bancorp turned to PennyStockChaser for promotions of both companies.
“The same guys who brought us AWSL have brought us MEVT,” PennyStockChaser proclaimed late last month. “AWSL has made members a fortune, and we are sure MEVT will do the same … The stock could see a move to the $5 (range) and make members big money – if they move fast.”
With its price hovering around 40 cents a share, however, MEVT has actually lost some ground instead. Still, since PennyStockChaser received 350,000 free trading shares in the company – worth $140,000 even at current prices – the firm stands to make money on the stock regardless.
Dark Secrets
PennyStockChaser offers few clues about those who actually run the website and therefore stand to profit from its trades. The firm lists no officers or directors on its website and now provides only generic contact information -- completely stripped of any names – in its press releases.
It even hired an outfit known as “Domains by Proxy,” which specializes in concealing the identities of website operators, to register its domain name instead of handling that routine matter itself.
“Domains by Proxy was conceived to deal with one of the biggest shortcomings of the Internet – the loss of privacy,” the firm states on its website. “If you want to keep your personal information private and still retain full benefits of domain registration, then a ‘private registration’ is for you. Your identity is nobody’s business but ours.”
For a while, PennyStockChaser did mention a few names – including Schonberg’s – in its press releases. This summer, for example, it listed Michael Scott Jacobs (occasionally misspelling his last name) as its certified financial advisor. It even provided Jacobs’ official broker registration number, which can be used for background checks showing that Jacobs was previously sanctioned by the Financial Industry Regulatory Authority. Although Jacobs neither admitted nor denied any wrongdoing, he inked $1 million worth of settlements – and saw his principal license suspended – as a result of his alleged misconduct.
PennyStockChaser identified Jacobs as its CFA in many of the same press releases that listed Schonberg as its official contact person. Even though the two men apparently worked together, however, Jacobs implied that Schonberg was a stranger when The Street Sweeper contacted him at his new employer – a tiny financial firm in Boca Raton, Fla. – for information about Schonberg’s current whereabouts and his professional background.
“I know absolutely nothing,” Jacobs stated in a rush. “I can’t help you at all.”
History Lesson
There is no shortage of information about the Michael Schonberg (also known as Mike) who ruined his career on Wall Street by investing client funds in the same types of risky companies that PennyStockChaser now touts.
In just one story about the infamous fund manager, published more than a decade ago, BusinessWeek reveals that Schonberg established big stakes in dubious penny stocks for three giant investment firms – UBS, Omega Advisors and, finally, Dreyfus – before his ultimate downfall. Schonberg even bragged about his aggressive strategy to the press when one of his Dreyfus-sponsored funds briefly became the top performer in the industry ahead of its looming crash.
“Right now, the fund is considered a ‘microcap’ fund based on the stock it owns,” Schonberg told the Pittsburgh Post-Gazette back in May of 1996. “We can own anything.”
While at UBS and Omega, BusinessWeek later observed, Schonberg had exercised similar judgment. During his final months as chief investment officer at UBS, the magazine reported, Schonberg ordered a big purchase of Chromatics Color Sciences – a hyped-up penny stock – that made UBS the company’s largest institutional holder. UBS liquidated that position around the time that Schonberg departed, the magazine added, but Dreyfus soon wound up with a similar stake in the same company with Schonberg managing its funds.
Meanwhile, BusinessWeek discovered, Schonberg had personally received “cut-rate” shares of that stock.
The SEC later fined Dreyfus $2.55 million and temporarily suspended Schonberg from associating with any investment advisors in response to the fiasco, Dow Jones reported in May of 2000. It also adopted more stringent rules aimed at preventing similar conflicts in the future, Dow Jones added.
Manuel Asensio, a famous short seller who declared Chromatics an outright fraud, assumed that justice had been served.
“The stock is at 3 cents,” Asensio noted in a 2002 deposition taken for a Chromatics-related lawsuit. “The underwriter was taken out. The brokers were taken out. And the crooked portfolio manager was taken out.
“Why,” he asked, “should the SEC do anything further?”
Big ‘Coincidence’
Later that year, Wall Street Reporter – a news outlet targeted by the SEC for touting stocks without disclosing the compensation it received in return -- began listing “Michael Schonberg” as one of its senior analysts. By early 2003, Schonberg had risen to become the firm’s official research director. He would hold that position until at least 2006.
After that, his name disappeared from public view until PennyStockChaser began listing “Mike Schonberg” as its official contact person in June. It stopped mentioning Schonberg by name – although he still works there – in its official press releases three months later. It dropped his name from press releases touting penny stocks (rather than its own website) even before that.
Internet searches turn up just eight addresses in the entire country for people named Michael or Mike Schonberg. Based on a background check conducted by a former FBI agent, one of those addresses (as well as a disconnected telephone number) belongs to the former Dreyfus fund manager. Unless one of the other seven also promotes penny stocks – an unusual career path for most – the Schonberg from Dreyfus and the Schonberg at PennyStockChaser appear to be one and the same.
Nevertheless, in a recent email exchange, PennyStockChaser suggested a possible case of “mistaken identity” – saying that its own Schonberg has no (current) affiliation with Dreyfus or Wall Street Reporter either one – and labeled the entire situation a “coincidence indeed.” It later ignored a request to confirm, on the record, that its Schonberg had never worked for Dreyfus at all.
If PennyStockChaser has in fact located its own Mike Schonberg to promote penny stocks – a scenario that many experts doubt – then the two men appear to share more than the same name. In an article covering a shareholder lawsuit filed against Schonberg 11 years ago, Reuters could have been describing the strategies embraced by either man.
“The complaint … alleged Schonberg, after starting to run the (Dreyfus) funds, started to invest in small, illiquid and volatile companies with little – and sometimes no – revenues or earnings,” Reuters stated, “and displayed an ‘obsession’ with microcap stocks.”
* Editor's Note: The Street Sweeper hired an independent fact-checker to verify the accuracy of this story. Whenever possible, it has also included links to the actual documents used during the course of its research. To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.
LIqiudmetal: Keeping Mum about Apple and Far More
This year, Liquidmetal Technologies (OTC: LQMT.PK) has kept some telling – and arguably material – secrets from its investors.
Take LQMT’s recent deal with Apple (Nasdaq: AAPL) as an obvious example. In a cryptic 8-K filing on Aug. 9, LQMT suddenly announced a contract with Apple that – on the surface – seemed to warrant a full-blown press release. Specifically, LQMT revealed that it had signed a “master transaction agreement” that would allow Apple to commercialize its technology for future use in its consumer electronics products.
LQMT never disclosed the terms of that licensing contract, however, allowing hopeful speculation to fuel the company’s shares instead. LQMT’s stock, which fetched just 13 cents a share a month ago, rocketed to a multiyear high of $1.76 last week before swiftly crashing on the lack of details associated with that high-profile deal. The stock, down another 10.6% on Wednesday, has now lost most of its Apple-related gains and currently trades for just 76 cents a share.
This spring, in the months leading up to that dramatic deal, LQMT kept quiet about another important development as well. In an even shorter 8-K filing on March 8, LQMT quietly disclosed that longtime Chairman John Kang had left the company without giving any reason for his departure. One week earlier, Kang was convicted at trial on fraud charges – carrying a potential five-year prison sentence – for inflating the financial results of another company he had previously led.
more...Ecosphere: A Clean Energy Company with a Dirty CEO?
Either Ecosphere Technology (OTC: ESPH.OB) CEO Dennis E. McGuire simply shares a lot in common with a twice-convicted drug felon – a coincidence of remarkable proportions – or he is the former jailbird himself.
Based on public records and news stories gathered by TheStreetSweeper, supplemented with a 63-page personal background report, the CEO and the ex-con look very much the same. The names and birth dates match. The names of multiple relatives come up as matches, too. Other key identifying traits – including addresses, business ties and even partial social security numbers – correspond as well.
McGuire’s original corporate bio, published in regulatory filings, hints at further parallels. That bio begins when McGuire graduated from community college in 1974 and, following a long and unexplained hole, picks up in detail when he invented his first cleaning technology (armed with a mere associate’s degree) more than 15 years later. The mysterious gap in between corresponds with the very period when the convicted McGuire operated a drug business, news reports show, and twice served time in jail.
more...Why Can't Ecosphere Score a Deal with BP?
Maybe Ecosphere Technologies (OTC: ESPH.OB) should have added Kevin Costner, the celebrity backer of a competing water-treatment device, to its star-studded team.
Despite ringing endorsements from its own superstars – including a big-name environmentalist and two retired professional athletes – ESPH has so far failed to secure an order from BP (NYSE: BP) for machines that, it says, can effectively address the company’s massive oil spill. Costner’s company, Ocean Therapy Solutions, fielded an order from BP for 32 of its machines almost two full weeks ago. ESPH is still waiting on an order, however, even though the company claims that it offers a superior device.
more...Junior Mining Companies and the 'Temple of Doom'
Ever since AmeriLithium (OTC: AMEL.OB) purchased some mining assets from GeoXplor -- a Vancouver outfit led by the so-called “Indiana Jones” of the lithium trade -- the company has taken investors on a wild and, at times, thrilling ride. If history repeats itself, however, AMEL investors better not count on a happy ending to their journey.
After all, GeoXplor has sold mineral claims to several other microcap companies that met with rather ugly fates. Even worse, government records show, GeoXplor founder Clive Ashworth has been previously banned from the securities industry for an alleged scam – which resulted in criminal convictions for two stock promoters – involving yet another resource company.
Nevertheless, Ashworth continues to win over junior mining companies and those who promote their risky stocks alike
more...Putting Together the Puzzle at Big Bear Mining
If Big Bear Mining (OTC: BGBR.OB) would risk hiring a bankrupt CEO with a checkered past to serve as the “public face” of the company – and essentially give him $30 million worth of stock for the favor – then investors might want to search for even darker secrets that the junior gold miner is still trying to keep.
They could start by examining BGBR’s original address. That address, listed in past BGBR regulatory filings as 1728 Yew St. in Vancouver, shows up in filings for several other penny stock outfits as well. Those companies share at least one glaring trait: They count Shane Whittle, a busy Vancouver stock promoter, among their top executives.
Armed with credible outside leads about Whittle’s connection to BGBR, TheStreetSweeper decided to call him and politely ask about his ties to the company. Whittle’s response came across as nothing short of violent.
He immediately claimed “no involvement” with BGBR and then warned of possible legal action for the “harassing” phone call. Specifically asked if he was making a threat, he replied with this: “Yeah, 100% … Take your phone call and shove it up your ass.”
more...Fearing Risks, Big Bear Promoter Tells Investors to Flee
Big Bear Mining (OTC: BGBR.OB) has scared off one of its most powerful fans.
James DiGeorgia, editor of the Gold and Energy Advisor newsletter, this week suddenly reversed his “strong buy” recommendation on BGBR and started urging his followers to sell the stock instead. His abrupt about-face came just one day after The Street Sweeper raised serious questions about BGBR’s true value and the paid promoters – including DiGeorgia himself – who have been touting the heavily traded stock.
“Based on new information I received in the last 24 hours that I was not presented with when I initially reviewed and recommended the stock, I believe it would be in the best interest of any investors holding shares in this company to sell them,” DiGeorgia stated in an official press release on Tuesday. “It doesn’t matter if you’ve made money or lost money holding BGBR.OB. Everyone who has based their purchase of shares on my recommendation should sell their shares.”
more...With China Tel, Has Tobin Smith Been 'Outfoxed' Again?
Tobin Smith, co-star of Fox News Channel’s popular “Bulls & Bears” investment show, recently declared a challenging new “mission in life.” In an upbeat message to his 2,700-plus followers on Twitter last week, Smith promised to helpChina Tel Group (OTC: CHTL.OB) – a penny stock company he has been touting for months – secure the financing it needs in order to survive.
To be sure, CHTL could use some assistance. More than a year ago, CHTL agreed to pay $195 million for a 49% stake in Chinacomm – an Asian broadband wireless company that ranks as its primary asset – but it still lacks the money required to actually pay for that deal. Although CHTL has inked plenty of financing agreements in the meantime, most recently with two mysterious firms known as Excel Era and the Isaac Organization, the company never seems to collect promised cash from those backers in the end.
more...Does the NanoLogix Rally Make Any Sense?
The NanoLogix (OTC: NNLX.PK) stock chart featured on a YouTube video – set to the catchy “Money Song” tune from Monty Python – looks rather outdated following this spring’s incredible, if inexplicable, spike in the company’s share price.
When that video first surfaced in the fall of 2007, NNLX was still focused on increasing hydrogen production with the help of grape juice while allowing Nutra Pharma (OTC: NPHC.OB) – the company’s former partner – to pursuebreakthroughs in its current business of diagnostic technology. (NPHC’s own volatile rally, staged late last year, has already come to an end.) Back then, NNLX’s stock had almost doubled in a month but still fetched only 15 cents a share. Since moving into the medical arena and converting a barn-like structure into a “clean room” for producing diagnostic testing kits (with the construction project captured in yet another YouTube video), however, NNLX has seen its stock rocket more than 200% in recent weeks to pass $1 a share.
Even Bret Barnhizer – NanoLogix’s own CEO – cannot explain that move.
more...Has Atlantic Wind and Solar Been Fueled by Hot Air?
Atlantic Wind and Solar (OTC: AWSL.PK) is suspected of blowing a lot of hot air in an effort to inflate the company’s stock price.
A year ago, AWSL supposedly acquired a 47.5% stake in Hybridyne Power Systems – later touting Hybridyne’s “best-in-class” technology and its access to an expansive research team – for $2 million worth of its own stock. After publicizing a string of stock-boosting projects secured by Hybridyne, however, AWSL suddenly announced this month that it had canceled its acquisition of the company due to an “unfortunate default by the vendor” that rendered the transaction “null and void.”
Notably, Hybridyne itself now claims that the acquisition never took place at all.
more...Can the Batteries Last on Overcharged Lithium Stocks?
Lithium Corporation (OTC: LTUM.OB) sure looks a whole lot prettier in paid tout sheets than it does in its regulatory filings.
In recent months, stock promoters have treated LTUM – a company with no revenue and just $855 in the bank – like a surefire winner that’s poised to supply giant automakers with the lithium they will need to power tomorrow’s battery-operated cars. The promoters offer similar reasons for their incredible confidence, led by soaring demand for lithium and LTUM’s ready access to lithium mines, while carefully excluding their compensation for touting the stock from its list of key attractions.
To some, however, even LTUM’s most “legitimate” selling points look suspect. They point to a recent article in The New York Times, entitled “The Lithium Chase,” as evidence.
more...Is IMGG's CEO Pulling the Plug on His Company?
* Click here to start/join a discussion of this article or send tips for future news stories.
To some, Imaging3 (OTC: IMGG.OB) CEO Dean Janes appears to be giving up on his own company.
On Feb. 11, exactly one month after IMGG announced the latest in a series of regulatory setbacks, Janes reportedly began pitching a new investment opportunity to his 1,000-plus “friends” on Facebook. In his biggest insider transaction on record, Janes then sold 2.6 million shares of IMGG stock the very next day. more...
Tradeshow Marketing Knows How to Sell Its Stock
Give Tradeshow Marketing (OTC: TSHO.PK) some credit. For a company riddled with so many ugly conflicts, TSHO sure knows how to put on a pretty face for investors.
TSHO can thank SkyMark Research – a promotional firm operated by the apparent son of TSHO’s own founder – for reshaping its public image. For years, TSHO looked like a failed business with limited appeal to even speculative investors willing to place bets on high-risk penny stocks. After SkyMark launched favorable coverage of TSHO late last year, however, the company saw interest in its long-overlooked stock suddenly skyrocket. more...
AENY: Look What's Hiding beneath that Former Shell
* Click here to start/join a discussion of this article or send tips for future news stories.
Americas Energy Company (AENY.OB) exposed some ugly flaws when it emerged from its corporate shell.
Following its heavily hyped reverse merger, AENY now counts CEO Christopher Headrick – a longtime dealmaker with a history of failure – as its sole officer, director and member of its staff. Although AENY has announced plans to expand its senior management team, the company aims to do so by hiring leaders who have benefited handsomely from a series of generous related-party deals. One of those potential executives, already identified as a company vice president in the past, has agreed to plead guilty to felony tax evasion charges and could face up to five years in prison for his crime. more...
IMGG Fails to Paint a Pretty Picture for Investors
* Click here to start/join a discussion of this article or send tips for future news stories.
The picture at Imaging3 (IMGG.OB) just got a whole lot uglier.
IMGG dropped a bombshell on investors this week, when it revealed a major setback in its lengthy battle to secure regulatory approval of its Dominion 3-D scanning device. For months, IMGG has indicated that the company simply needed to resolve one minor issue – involving the Dominion’s label – in order to satisfy reviewers at the U.S. Food and Drug Administration. During a conference call with shareholders on Tuesday, however, IMGG reported that it has now fielded more than a dozen questions from FDA staffers who are evaluating the company’s device. more...
Convicted Swindler Touts Risky Penny Stocks
Rich Roon had already served time in prison for swindling investors when he decided to reenter the securities business as a penny stock promoter.
In 2003, just 16 months after his release from jail, Roon quietly established a consulting business that targets obscure microcap companies desperate for publicity. Roon’s firm, known as Oceanic Consulting, aggressively promotes penny stocks on its OTC Reporter website in exchange for shares of the companies being touted. Over the years, Oceanic Consulting has collected – and promptly sold – billions of free shares of penny stocks that have lost money for average investors. more...
