SEC Settles Securities Fraud Action Against "Tokyo Joe"
FOR IMMEDIATE RELEASE
2001-26Internet stock picker required to give up all illegal profits,
pay a penalty of more than $400,000 and consent to
the entry of an anti-fraud injunction
Chicago, Ill., March 8, 2001 The Securities and Exchange Commission has settled the enforcement action it brought last year against Yun Soo Oh Park, the Internet stock picker known as "Tokyo Joe," and the company Park controls, Tokyo Joe's Societe Anonyme Corp. Under the terms of the settlement, which was as approved today by the District Court for the Northern District of Illinois, Park and Societe Anonyme, without admitting or denying the allegations made in the Commission's Complaint, consented to entry of a federal District Court order that permanently enjoins them from violating the antifraud and other provisions of the federal securities laws, and orders Park and Societe Anonyme to pay $324,934 in ill-gotten gains and $429,696 in civil penalties, for a total monetary payment of $754,630. Park and Societe Anonyme also agreed to post a hyperlink to the court order on the home page of the Tokyo Joe web site for a period of thirty days.
SEC Enforcement Director Richard H. Walker said, "This case has established groundbreaking precedent: Those who are in the business of offering investment advice on the Internet may take on the same duties and responsibilities as other investment advisers." Mr. Walker added, "Today's settlement demonstrates that we will not countenance undisclosed conflicts of interest or other fraudulent conduct from those recommending purchases or sales of securities whether on the web or elsewhere."
SEC Midwest Regional Director Mary E. Keefe said, "In requiring Park and Societe Anonyme to pay a significant penalty and to give back all of the profits they made from their illegal trading and touting, we are sending a clear message to those in the stock-picking business: We will pursue you vigorously if you mislead your customers."
In its Complaint, filed in January 2000, the Commission alleged that Park, a self-proclaimed Internet stock-picking guru, operated an Internet web site through which investors who paid a monthly membership fee received stock recommendations and other investment advice from Park. The Commission charged that Park defrauded members of his Societe Anonyme by failing to disclose that, in several instances, he had already purchased shares of the stock that he was recommending and that he planned to sell his shares into the buying flurry and subsequent price rise that followed his recommendations, an illegal practice known as "scalping." The Commission also charged that Park touted one company to members of Societe Anonyme and to the public without disclosing that he had received shares of stock in the company in exchange for his recommendation. Finally, the Commission charged that the past performance results posted on Park's web site were materially false and misleading.
Before submitting his settlement offer, Park moved to dismiss the Commission's Complaint, arguing primarily that, since he dispensed his stock picks and investment advice over the Internet, he was not an "investment adviser" within the meaning of the Investment Advisers Act and that the antifraud provisions of that Act could not be constitutionally applied to him. The District Court denied Park's motion to dismiss in its entirety and held that the Commission's Complaint sufficiently alleged that Park was an "investment adviser" under the Advisers Act and that Park was subject to that Act's antifraud provisions. (SEC v. Park a/k/a Tokyo Joe, and Tokyo Joe's Societe Anonyme Corp., 99 F. Supp. 2d 889 (N.D. Ill. 2000).
Under the terms of the settlement, Park and Societe Anonyme consent to a permanent injunction prohibiting them from violating the antifraud provisions of the Investment Advisers Act of 1940 and the Securities Exchange Act of 1934, as well as the anti-touting provision of the Securities Act of 1933. Park and Societe Anonyme also are required to pay all of the $279,696 in profits they made from the thirteen instances of scalping and the one instance of illegal touting alleged by the Commission, plus $45,238 in prejudgment interest on that amount, for a total disgorgement payment of $324,934. Park and Societe Anonyme also are required to pay a civil penalty equal to the amount of their scalping and illegal touting profits ($279,696) plus an additional penalty of $150,000 based on Park's posting of false and misleading past performance results on the Tokyo Joe web site, for a total penalty payment of $429,696. Finally, within two days of the entry of the District Court order, Park and Societe Anonyme must post a hyperlink to a copy of the Commission's order on the home page of the Tokyo Joe web site for a period of thirty days.
For further information, call Mary Keefe at (312) 353-9338 or Tom Szromba at (312) 353-7416.