UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16919 / February 28, 2001
SECURITIES AND EXCHANGE COMMISSION V. PINKMONKEY.COM, INC. AND PATRICK R. GREENE Civil Action No. H-01-9711 (NFA) (S.D. Texas, Houston Division)
On February 28, 2001, the Securities and Exchange Commission ("SEC") filed civil fraud charges in federal district court in Houston, Texas, against PinkMonkey.com, Inc. and Patrick R. Greene (collectively, the "Defendants") in connection with a fraudulent press release that caused an unwarranted 950% increase in the price of PinkMonkey's common stock. The Defendants have consented to entry of permanent anti-fraud injunctions, and Greene has agreed to a $20,000 civil penalty.
The SEC's complaint charges the Defendants with securities fraud in connection with a November 30, 1998 press release in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Greene approved the November 30 release, which falsely announced the "launch" of a new website service that could "quickly reach a significant market share in the $400+ million" study aids market. The website was neither newly launched nor likely to realize any significant market share, however. Instead, by November 30, 1998, PinkMonkey had operated the website for 14 months and generated only $30 in sales. Furthermore, although the November 30 release proclaimed expectations of "quickly reaching" a "significant" share of a $400+ million market, PinkMonkey and Greene instead anticipated needing one year to capture five per cent of a market totaling only $160 million.
Before the release, PinkMonkey's stock was thinly traded, at a price of $1.50 or less. Within an hour after the release, PinkMonkey shares traded for as much as $4.375 per share, on heavy volume. The price continued to soar, eventually reaching a peak on December 2 at $17 per share, a 950% increase from just two days earlier, before closing at $13.50 per share. At its zenith, PinkMonkey's market capitalization exceeded $200 million, although the company had only four full time employees and nominal sales. After PinkMonkey and Greene issued a clarifying press release on December 3, 1998, the company's stock price fell to $7.25 per share by the close of trading that day. PinkMonkey has never realized significant revenues, and its stock now trades for about $0.20 per share.
This action is brought as part of the SEC's Fifth Internet Fraud Sweep. For tips on how to avoid Internet investment schemes, visit http://www.sec.gov/investor/pubs/cyberfraud.htm. For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm. To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml. For a description of other SEC enforcement actions involved in this Internet Fraud Sweep, visit http://www.sec.gov/news/press.shtml.http://www.sec.gov/litigation/litreleases/lr16919.htm