NEW YORK — A St. George man was one of 23 individuals and companies swept up in a federal crackdown against online stock scams Thursday.
And Jeremy Johnson, 25, says that action is keeping him out of the Internet stock business . . . at least for now.
The Securities and Exchange Commission announced 11 actions against the 23 people and companies who allegedly used the Internet to manipulate stock prices and defraud investors.
The SEC's action marked its fifth nationwide "sweep" against such investment scams, which have cost market speculators millions of dollars in recent years.
The nine new cases all involved so-called "pump and dump" schemes, in which promoters boost a stock's price by making false claims about the company, then sell their own shares to cash in on the artificially high price.
The scams inflated the value of stocks involved by a total of more than $300 million, generating $2.5 million for the perpetrators, the SEC said.
One of those scams involved Johnson and his company, RumorSearch.com, which researched stock rumors for customers who paid $13.25 per month, or $159 per year. The commission said that in January and February 2000, Johnson profiled Far East Ventures Inc. as RumorSearch's Stock Pick of the Month, sent several e-mails to service subscribers and others praising Far East Ventures and received 95,000 of the company's shares for touting it.
"In these touts, Johnson and RumorSearch misrepresented or omitted to disclose material information regarding FEVI, the reliability of information and Johnson's receipt of compensation for touting," the SEC said in a release. "While touting FEVI through his false and misleading releases, Johnson sold 66,500 FEVI shares at a profit of $315,848."
RumorSearch.com and Johnson agreed to return ill-gotten profits and pay civil penalties, without admitting or denying the allegations, the SEC said.
Johnson said he was painting houses for a living when he decided to start trading in the stock market.
"I just came up with a good idea to research some of the rumors that go around on the Internet on these bulletin boards," Johnson said Friday. "We got really popular fast, and that attracted these people who run these kinds of bogus companies. They fed us everything that got us excited about them, then offered us stock, which was a great thing, too. And we kind of fell for the whole thing. . . .
"The problem was that I didn't take time to research and review the different laws we needed to adhere to, and we had all of these companies willing to give us money to put information about us on their site, and we thought it was a great thing."
Johnson said RumorSearch was only three months old when the incident with Far East Ventures occurred, and he learned that the company was providing incorrect information even before the SEC came knocking.
"That's when we stopped working with them," Johnson said. "It killed us. It ruined our business and stuff. Until that point, we had a really good thing going."
RumorSearch has since dissolved, he said.
"I still do work on the Internet doing Web sites, but I don't do anything with stocks," Johnson said. "Someday we might do RumorSearch again, but it might be awhile."
The SEC enforcement actions marked the latest round in a crackdown against investment fraud dating back to 1998. Sweeps in October 1998 and February 1999 targeted people promoting stocks without disclosing their compensation by the companies. A sweep in May 1999 focused on sales of sham investment opportunities. Another in September of last year zeroed in on pump and dump schemes.
The cases announced Thursday brings to more than 200 the number Internet-related enforcement actions brought by the SEC.
Contributing: Associated Press, Bloomberg News