SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17540 / June 5, 2002
SEC v. Invest Better 2001, Cole A. Bartiromo, and John/Jane Does 1-10, 01 Civ. 11427 (BSJ)(S.D.N.Y. filed January 7, 2002)("IB2001")
SEC ENTERS PARTIAL SETTLEMENT WITH COLE A. BARTIROMO, A 17 YEAR OLD, WHO ENGAGED IN AN INTERNET PUMP AND DUMP SCHEME AND ORCHESTRATED A FRAUDULENT UNREGISTERED INTERENT OFFERING.
The Securities and Exchange Commission ("Commission") announced that Cole A. Bartiromo, a 17-year-old high school student, agreed to a partial settlement in which Bartiromo agreed to disgorge ill-gotten gains and interest totaling $93,731.00 that he procured from an Internet pump-and-dump scheme in which he manipulated the stock price of fifteen publicly-traded companies. Bartiromo previously disgorged to the Court's account more than $1,000,000 that he and Invest Better 2001 ("IB2001") obtained from investors in connection with fraudulent unregistered offerings of securities which defrauded more than 1,000 investors.
In its first amended complaint, filed January 7, 2002, the Commission alleged that Bartiromo raised more than $1 million from more than 1,000 investors through a scheme known as "Invest Better 2001," which, from at least November 1, 2001, purportedly offered "guaranteed" and "risk-free" investment programs in which IB2001 pooled investors' funds to bet on sporting events, and promised to repay investors between 125% and 2500% of their principal within specified periods ranging from three days to several weeks.
In its second amended complaint, filed April 29, 2002, the Commission alleged that Bartiromo conducted an Internet pump-and-dump scheme in which he manipulated the stock price of fifteen publicly traded companies from approximately May 14, 2001 to July 5, 2001. More specifically, Bartiromo disseminated numerous false and misleading messages concerning publicly traded companies on the Internet. The complaint alleges that for each manipulation
Bartiromo purchased large blocks of stock, consisting in some cases of nearly 50% of the volume on that day, then posted thousands of identical false messages on Internet message boards, and subsequently sold his entire position. According to the second amended complaint, Bartiromo posted over 6,000 messages and traded several million shares of the fifteen companies in this manner, and, as a result, generated a net profit of over $91,000.
The United States District Court for the Southern District of New York, on May 29, 2002, issued an Amended Partial Final Judgment and Order, on consent, which permanently enjoins Bartiromo and IB2001, directs Bartiromo and IB2001 to repatriate all assets outside the United States and deposit such assets into the Court's account, freezes Bartiromo's and IB20001's assets, orders disgorgement of all ill-gotten gains and grants other relief. Still pending in the action are the issues of what civil penalty should be imposed by the Court and the determination of the total amount of disgorgement of ill-gotten gains relating to the IB2001 claims.