SEC reins in jailhouse stock advisor's Web site
'Stop exaggerating, you naughty boy'
The US Securities and Exchange Commission (SEC) uncovered an amusing on-line securities fraud operation on Monday, when it emerged that that an investment advice Web site called Genesis Trading is run by a convict serving a one-year prison term for telemarketing fraud, and not professional traders and analysts as the site had advertised, the New York Times reports. "The moral of this case is that people should be careful if they take investment advice from Internet sources because it's not always what they think it is," SEC advisor David Levine noted. The SEC settled the complaint with jailbird Webmaster Robert Garganese, ordering him to cease attributing his stock picks to professional traders and to inform site visitors of the SEC action. The SEC said Garganese claimed that his picks came from "a company composed of professional traders." But Garganese, the company's sole employee, is not affiliated with any securities trading organization, the Times notes. The SEC also found nothing to support Genesis' assertion that more than eighty percent of its recommendations were profitable, and ordered Garganese to remove the claim. Garganese's lawyer said he did not view his client's conduct as fraud, but as a marketing gimmick to "create more excitement about the site." "Since use of the Internet is so new, he was unfamiliar with the rules," lawyer David Chesnoff explained. "He had no intent to injure or defraud people." The SEC dealt with the matter in an 'administrative procedure' rather than mounting a civil suit or a prosecution, which would have required a higher standard of evidence. Genesis began operating in 1998, offering stock picks which were allegedly based on the buying habits of institutional money managers. The SEC found that Garganese is the only contributor to the site, and that his stock picks are a product of commercial software which does not feature the tracking of institutional trends. Garganese also claimed that his picks "regularly move $2 to $10 in a very short time frame (usually 1-5 days)," a claim which the SEC said could not be substantiated. The Genesis Trading Web site was down at this writing. ®
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