Infinium Labs' Founder Charged With Pump And Dump Scam
from the no-product,-but-the-stock-trades-were-real dept
Within the gaming community over the past few years, there have been two companies that have been repeatedly questioned as being stock scams of some sort — and it appears that the founders of both companies are facing some legal trouble these days. Gizmondo’s execs are facing well publicized legal difficulties along with questions over stolen cars (no specific questions over questionable activities at Gizmondo yet, though). However, the other big one has always been Infinium Labs and their ever so aptly named Phantom gaming console. Questions about whether or not the console was real first started getting attention in the summer of 2003, which was then followed by an investigation by the site HardOCP. Their article raised an awful lot of questions about Infinium’s founder, and whether or not he was trustworthy, considering his history of bankruptcies that seemed to cost investors lots of money, along with inconsistencies having to do with his resume. Rumors started spreading that the company (which had gone public through a reverse merger — a popular tactic used by scammers, though it’s not always a scam) was really just a stock scam. The continued complete lack of any real product, but plenty of hype, certainly increased that speculation. While the company appeared to show the device publicly, many suggested that the demos were faked.
However, after lots of questions, the company suddenly brought in some serious credibility in early 2004 by hiring a well known CEO, a former executive at Microsoft who worked on the X-Box. With this sudden boost of credibility, many were shocked when the company’s first big move after this new hire, was to sue HardOCP for libel over their months’ old post questioning the company’s founder. What was most suprising about this is that many people had put the questions about Infinium behind it, assuming the new CEO gave the company legitimacy. Suing HardOCP simply gave the original accusations a lot more attention — which got even worse when HardOCP won the case. After that, things only got worse. There were plenty of additional announcements about launch dates and prices… and no product was ever released. Then, at one point late last year, the company suddenly said it wasn’t going to sell that gaming console, but a gaming keyboard instead — though that product is still vaporware as well. Of course, then there were lawsuits from a former investment banker who claimed the company stiffed them on their fee after helping it raise $30 million. Then there was the executive who claimed he was brought on to help them raise money, but he was fired right before the reverse merger (though, he later rescinded the charge). On top of that, there were the SEC filings that showed the company somehow squandered almost $67 million, but only $2.5 million of that went towards product development.
So if all of that isn’t enough evidence to raise some questions about what was really going on at Infinium Labs, it appears the SEC has finally taken an interest in the company, as it turns out Infinium Labs’ founder is now being charged with running a pump and dump stock scam. He apparently hired someone to send out a junk fax spam promoting the stock, quickly selling nearly half a million dollars worth of his own shares, without disclosing those sales to the SEC (a bit of a no-no for a public company). He also paid the stock promoter in stock, again without letting the SEC know. In the end, it certainly would appear that HardOCP had the right idea with their original assessment of Timothy Roberts and Infinium Labs, suggesting that it was a clear case of “buyer beware.” Unfortunately, it looks like more than a few investors weren’t so careful in their due diligence.