SEC Charges Former Video Game CEO in Junk Fax Scam
FOR IMMEDIATE RELEASE
Washington, D.C., May 16, 2006 The Securities and Exchange Commission today charged the former Chief Executive Officer of Seattle-based video game developer Infinium Labs, Inc., for his role in a fraudulent “junk fax” scheme to promote the company’s stock. The Commission alleges that Timothy M. Roberts, 36, of Longboat Key, Fla., authorized the fax promotion and reaped more than $400,000 by unloading his Infinium Labs shares in the ensuing run-up in trading volume.
According to the Commission’s complaint, filed in the United States District Court for the Middle District of Florida, Roberts hired a stock promoter in November 2004 to send faxes to tens of thousands of potential investors across the country. The faxes made it appear as if Infinium Labs were on the verge of launching its flagship product, a home videogame system called the “Phantom.” In fact, at the time of the fax campaign, Infinium Labs lacked the financial resources to overcome the significant technological and manufacturing hurdles preventing it from marketing the game system to consumers. The faxes also included baseless stock price targets, predicting that Infinium Labs’ stock price would rise as much as 3,000% in the coming weeks, and falsely claimed that the company was headed by a developer of the Microsoft X-Box.
The Commission alleges that, over the four months of the fax campaign, Roberts took advantage of the increased trading volume in Infinium Labs stock to sell approximately $422,500 of his personal stock holdings. Many of Roberts’s stock sales went unreported to the public. The Commission’s complaint also alleges that Roberts paid the promoter with four million shares of his own Infinium Labs stock in violation of the registration provisions of the federal securities laws.
Helane L. Morrison, District Administrator of the Commission’s San Francisco District Office, said, “As always, investors need to be wary of unsolicited junk faxes. They could be little more than an attempt to fraudulently inflate the stock price for the benefit of insiders and stock promoters.”
The Commission seeks to enjoin Roberts from future violations of the antifraud, stock registration, and ownership disclosure provisions of the federal securities laws. In its complaint, the Commission requests that the District Court order Roberts to disgorge his ill-gotten gains plus prejudgment interest, impose a civil money penalty, and bar him from participating in penny stock offerings and from serving as an officer or director of a publicly-traded company.
The stock promoter hired by Roberts, Michael O. Pickens, was previously charged by the Commission for his role in a related scheme to manipulate the stock of Infinium Labs and several other small-cap companies through a series of fraudulent faxes, and is under criminal indictment by the United States Attorney for the Southern District of New York.
For tips to avoid costly mistakes, the Commission encourages investors to read Junk Faxes: How to Handle Those “Blasted” Faxes at http://www.sec.gov/investor/pubs/junkfax.htm.
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For further information contact:
Helane L. Morrison
Marc J. Fagel
Associate District Administrator
San Francisco District Office
U.S. Securities and Exchange Commission
Additional materials: Litigation Release 19701