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Published:November 21st, 2006 14:01 EST
The Case of the Phony Faxes, FBI Stories

The Case of the Phony Faxes, FBI Stories

By SOP newswire

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 faxes—and plenty apparently did—noticed 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:

"I have a stock for you that will tripple [sic] in price just like the last stock I gave you 'SIRI' did. I can't get you on either phone. Either call me, or call Linda to place the new trade. We need to buy IFLB now."

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 airwaves—December 17—shares 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 fax—Data Evolution and Soleil Film—saw similar increases.

The happiest holiday of all, though, may have belonged to Texas stock promoter Michael O. Pickens—son 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:

  • Don't take the bait on faxes and e-mails that appear personalized and lead you to believe you are inadvertently receiving a hot tip on little-known stocks;
  • Be especially suspicious of one-page "tout sheets" or e-mails making outlandish claims that a stock will double or triple in the near future and that contain disclosures in small print referencing payment by an "unaffiliated third party";
  • Beware of stocks that change their names frequently, have reverse share splits, or are topics of frequent news releases that can't be independently verified—all signs of scam artists at work.

Source:FBI