SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16541 / May 8, 2000
SEC v. MARK SCHULTZ, Civil Action No. 00 Civ. 3443 (S.D.N.Y.)
SEC SUES MARK SCHULTZ FOR FRAUDULENT STOCK TOUTING
The Commission today announced that on Friday May 5, 2000, it filed suit against Mark Schultz, 47, for stock fraud in connection with Schultz’s touting of the securities of 15 issuers through internet e-mails and other media. Schultz, formerly a resident of Jupiter, Florida, is now believed to reside in Spain.
The Commission's complaint, which was filed in the United States District Court for the Southern District of New York, alleges that Schultz distributed stock recommendations through a variety of subscription services, including newsletters called Stocks for Tomorrow and Traders Faxline, which he distributed through e-mail over the internet. Schultz’s Stocks for Tomorrow recommendations also appeared as paid advertisements in other publications, including Individual Investor magazine, between 1995 and 1997. The complaint alleges that Schultz received over $500,000 in subscription income between 1995 and 1999.
The Commission’s complaint also alleges that, as compensation for his touting, Schultz received undisclosed stock and cash compensation with a value of over two million dollars from at least thirteen issuers. Those issuers are Acacia Research Corp., American Entertainment Group, American Nortel Communications, AWG, Ltd., Eutro Group Holdings, Inc., EVRO Corp., Imagica Entertainment, Inc., Imaging Diagnostic Systems, Inc., N.U. Pizza Holding Corp., Tessa Complete Health Care, Inc., Wasatch International Corp., and WestAmerica Corp. The Commission’s complaint alleges that Schultz’s recommendations typically made inflated financial projections and predicted short-term price increases of 100 percent or more. The Commission’s complaint also alleges that Schultz misrepresented his recommendations of these issuers as the product of independent analysis when in fact his publications were merely paid tout sheets. The complaint alleges that in many cases Schultz would receive “bonuses” if the stock he touted achieved certain price levels.
The complaint also alleges that Schultz engaged in the practice of “scalping” or selling stock contrary to his circulated recommendations with respect to the securities of Acacia Research Corp., Advanced Laser Products, Inc., Colossal Resources Corp., and Imagica Entertainment, Inc.
The complaint charges Schultz with violating Section 17(b) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and the Exchange Act Rule 10b-5. The complaint seeks permanent injunctive relief against Schultz, disgorgement of ill-gotten gains, and civil monetary penalties.http://www.sec.gov/litigation/litreleases/lr16541.htm