March 1, 2011 Pump-n-Dump of DRWN
Pump-n-Dumps are alive and well on InvestorsHub.com
By B. David Mehmet August 17, 2012
Even with all the SEC convictions of stock fraud, there is NOT an end nor do I expect there will be an end to stock and shareholder manipulation. I think the solution would be to push investors to initiate their own litigation against these individuals. Since there is an abundant amount of this type of bad conduct being perpetrated online and the SEC is incapable of handling the workload, this type of litigation should be welcomed by legitimate stock traders and the SEC itself.
For example, the investor would initiate a lawsuit against the stock and shareholder manipulators working under the usernames Pennymachine and Muga on Investorshub.com. In one incident these two usernames were used to manipulate shareholders into buying the stock DRWN of the company “A Clean Slate, Inc.” The company had reported NO earnings, their stock had run in the triple zeros since 2008 to only pop to $2 on March 1, 2011 then it IMMEDIATELY dropped down to triple zeros thereafter, and their website had almost NO traffic. Since the moderators are AGENTS of InvestmentHub, the company can also be sued for the bad conduct of its moderators (http://investorshub.advfn.com/A-Clean-Slate-Inc-DRWN-10542/). InvestorsHub was previously sued in Canada, which resulted in a $4 Million default judgement. A consent judgement was entered into where the parties agreed that the default judgement was not enforceable in Florida (“http://www.prnewswire.com/news-releases/mina-mar-group-awarded-judgment-vs-investorshubcom-lawsuit-62168702.html)
Liability of PennyMachine, Muga and InvestorsHub
1. That Pennymachine and Magu did engaged in a stock and shareholder manipulation scheme within InvestorsHub’s DRWN forum for the purpose of inducing investors into purchasing the DRWN stock belonging to the company “A Clean Slate, Inc.”
2. That InvestorsHub did accept and approve Pennymachine and Magu as its MODERATORS within its DRWN forum. And in doing so, Pennymachine and Magu became the AGENTS of InvestmentsHub. As moderators, Pennymachine made 36,865 posts since 02/21/2011 and he is the moderator of 13 forums on InvestorsHub. Magu made a total of 39,593 posts since 08/28/2009 and he is the moderator of 29 forums on InvestorsHub. Both Pennymachine and Magu would repeatedly respond to each other’s posts in pumping up stocks and manipulating investors to buy worthless stocks.
“The term “moderators” refers to “individuals whose job it is to look after the running of the forums from day to day.” (SGI, ¶ 41.) Moderators can edit, delete, and reorganize postings in the forums. (SGI, ¶ 42.) Some moderators, referred to as “admins,” also have the ability to ban selected abusive users and remove user-posted dot-torrent files. (Id.) There is no substantive dispute by Defendants regarding their relationship to these individuals. Defendants assign this status and give these individuals authority to moderate the forums and user discussions. These individuals were under the control of Defendants and assigned duties related to the administration of the web forums.
Therefore, there is an agency relationship between these individual moderators (or “admins”) and Defendants.”
Columbia Pictures Industries, Inc. v. Fung,U.S. District Court, C.D. California. December 21, 2009 Not Reported in F.Supp. 2d 96 U.S.P.Q..2d 1920
3. That on August 17, 2012, Pennymachine and Magu did utilize InvestorsHub’s forum DELETION tool to remove negative posts within the DRWN forum for the purpose of furthering their stock and shareholder manipulation scheme by fooling investors into believing that DRWN was a valuable stock that was about to have an “epic breakout”.
4. That Pennymachine and Magu did publish false content within multiple forums of InvestorsHub for the purpose of furthering their stock and shareholder manipulation scheme by falsely informing the investors that ”A Clean Slate, Inc.” was about to take certain actions that would cause the DRWN stock to breakout when NO such action was being taken by the company. Furthermore, there NEVER existed any announcement or intentions by any company to acquire “A Clean Slate, Inc.” nor was such an acquisition feasible at that time. And outside the short term price pops manufactured by Pennymachine and Magu manipulation of the shareholers, DRWN did NOT have the potential for an “epic breakout” or to hit 0.0008 or 0.0010 on the company’s current status. The DRWN stock charts shows signs that it was subject to a pump-n-dump scheme on March 1, 2011. And it appears that Pennymachine and Magu were attempting to manufacture another pump-n-dump scheme in DRWN.
5. That in posts made within InvestorsHub’s forums on August 16-17, 2012, Pennymachine stated in Post No. 3403: “DRWN ( 0.0003) watch for a BIG ACQUISITION NEWS soon >>NEW CEO on board. In Post No. 3731, Pennymachine stated: “Hit’s .0008 like clockwork“. In Post No. 3364, Pennymachine stated: ”Bid/Ask Ratio setting up for an Epic Breakout $$$$$$$$“, and in Post No. 3446, Pennymachine stated: ”This baby is heading to .0010+, dumb to sell any cheaper“.
6. That in posts made within InvestorsHub’s forums on August 16-17, 2012, Magu stated in Post No. 3796: “.0020 looking mighty fine here“. In the forum Money Runners, Magu stated in Post No. 174417: ”DRWN .0003 CHART open to .0024 $$$$$$$$$$“. In the forum BB’s Stock Haven, Magu stated in Post No. 2754984 : “DRWN .0003 monster move building up!!!$$$$$$$ “ and in the DRWN forum, Magu stated in Post No. 3100: “$DRWN 2000% runner at least $$$$$$$$“.
7. That in furthering their stock and shareholder manipulation scheme, Pennymachine and Magu made multiple DUPLICATE posts in other forums for the purpose of manipulating investors into buying the DRWN stock. For example, in posts made on the forum o.0001 PICKS ONLY, Pennymachine stated in Post No. 220077: “*DRWN* Bid/Ask Ratio setting up for an Epic Breakout $$$$$$$$” and in forum 10-Baggas Factory 10, Pennymachine stated in Post No. 113343: ”DRWN ( 0.0003) watch for a BIG ACQUISITION NEWS soon >>NEW CEO on board“. And Magu made identical statements in forum 0.0001 PICKS ONLY Post No. 220037 and in forum 10-Baggas Factory 10 Post 113293 that ”DRWN (0.0003) watch for a BIG ACQUISITION.NEWS.soon >>NEW.CEO. on.board” (There exists the possibility that the usernames Pennymachine and Magu are owned by the same person, which violates InvestorsHub user terms).
8. That in response to the enormous posts by Pennymachine and Magu, investors were manipulated into buying the DRWN stock, which caused a manufactured up tick of the DWRN stock price and Pennymachine and Magu would then play on that up tick to fool more investors into believing that DRWN was about to have an “epic breakout”. For example, in Post No. 3353, the Investor BillG2436, in responding to Pennymachine and Magu’s posts, stated “I’m in boys!!“.
9. That in furthering their stock and shareholder manipulation scheme, Pennymachine and Magu intentionally made enormous amounts of posts within the DRWN forum to cause InvestorsHub to list DRWN in the No. 1 spot on the Breakout Boards to fool investors that DRWN was on the verge of an “epic breakout” (The breakout Rate is the change in posting activity in the past 24 hours vs. the average from the prior 7 days). Pennymachine and Muga intentionally and maliciously used their manufactured breakout rating to draw unsuspecting investors into the DRWN forum for the purpose of subjecting them to their stock and shareholder manipulation scheme (The majority of the 578 posts recorded on August 17, 2012 were made by Pennymachine and Muga). For example, in using the manufactured breakout rating to manipulate investors, Magu made a statement in the forum BB’s Stock Haven under Post No. 2754764 that “DRWN (.0003) #1 BREAKOUT BOARDS NEXT BBDA?$$$$$$“ and he posted a link back to the DRWN forum (In protecting investors from this type of manipulation, the breakout rating system can be improved by only allowing the recording of the total users posting instead of the total posts).
Breakout Board (8/17/12)
10. That upon information and belief, Pennymachine and Muga are shareholders of DRWN and their further purpose of their stock and shareholder manipulation was for personal financial gain.
11. That upon information and belief, Pennymachine and Muga are also stock promoters of DRWN in exchange for monetary compensation directly or indirectly from ‘A Clean Slate, Inc.” who are the owners of the stock ticker DRWN. And thus, they have violated SEC rules by failing to inform investors of this fact and to disclose the amount of their compensation.
12. That but for the wrongful conduct of Pennymachine and Magu, multiple investors would have NOT purchased the DRWN stock to their detriment.
13. That the investors had reasonable and justifiable reliance on the statements of Pennymachine and Magu because InvestorsHub made them MODERATORS/AGENTS of the DRWN forum and InvestorsHub notified the investors on its Breakout Board that DRWN had a 1.091% breakout rating, which evoked trust and the belief that DRWN was about to have an “epic breakout” (To prevent this type of abuse and liability, forums should replace the moderator feature with a ” Customer Report Abuse” feature”).
InvestorsHub Refused to Protect Investors
14. That upon InvestorsHub being placed on notice of the wrongful conduct of its MODERATORS/AGENTS, Pennymachine and Magu, InvestorsHub did REFUSE to remove or restrict their access to the DRWN forum, which allowed them to continue their stock and shareholder manipulation scheme in violation of InvestorsHub’s user and moderator terms.
15. That when the Administrator of InvestorsHub, Mr. David Lawrence, was personally placed on written notice of Pennymachine and Magu’s stock and shareholder manipulation scheme within the DRWN forum on August 17, 2012, Mr. Lawrence stated in writing quote “We [are] not interested in your “notice” or opinions about other users” unquote.
16. That InvestorsHub conspired with Pennymachine and Muga to manipulate the stock price and shareholders within the DRWN forum when it appointed Pennymachine and Muga as MODERATORS/AGENTS of the DRWN forum, which evoked investor trust, and then it allowed Pennymachine and Muga to violate the user and moderator terms while subjecting investors to a violation of those same terms. e.g. InvestorsHub gave Pennymachine and Muga the ability to DELETE investor posts and to make their own posts within the DRWN forum, which created a conflict of interest with opposing investor opinions. Pennymachine and Muga then used that power and trust to make multiple false posts and to delete negative posts about DRWN for the purpose of fooling investors that DRWN was a valuable stock verging on an “epic breakout”. When investors would post a complaint on the DRWN forum concerning Pennymachine and Muga engaging in a stock and shareholder manipulation scheme with the DRWN stock, InvestorsHub would hold the investors in violation of the user terms and it would SUSPEND the investors’ posting privileges within all the forums except the forum labeled “JAIL”. When these investors complained directly to InvestorsHub about Pennymachine and Muga engaging in a stock and shareholder manipulation scheme and that they violated the user and moderator terms, InvestorsHub would hide behind 47 USC § 230 and inform the investors that it was none of its business and that the investors should take up the matter directly with Pennymachine and Muga. InvestorsHub would then continue to assist Pennymachine and Muga in their stock and shareholder manipulation scheme as described above.
17. That InvestorsHub opened its forum content to multiple search engines on the Internet. And thus, InvestorsHub intentionally took action to have the stock and shareholder manipulation scheme perpetrated by its MODERATORS/AGENTS published on other websites that contained a URL linking investors back to the DRWN forum. For example, entering the stock ticker symbol DRWN in the Google search engine produced a URL on the first page that linked investors to the DRWN forum where they were subjected to the stock and shareholder manipulation scheme of InvestorsHub’s MODERATORS/AGENTS.
18. That as MODERATORS/AGENTS of InvestorsHub, Pennymachine and Muga were required “To promote the civil exchange of on-topic diolog that complices with the InvestorsHub Terms of Service” and “the role of the Moderator is to…..be the site’s first line of defense in ensuring we remain free of spam, vulgarity, and personal attacks”.
19. That by failing to RESTORE the negative posts about DRWN deleted by Pennymachine and Magu after notice to InvestorsHub, InvestorsHub violated its own user and moderator terms that stated “The principle objective of the iHub message boards is to maintain a high signal-to-noise ratio while encouraging the exchange of all points of view” and “In short, the role of the Moderator is to help foster an environment that promotes and encourages posting of ALL opinions and information about companies, regardless of the bullish or bearish sentiment of the posts”.
20. That by failing to RESTORE the negative posts about DRWN deleted by Pennymachine and Magu after notice to InvestorsHub, InvestorsHub violated its own user and moderator terms that stated “It is also not the Moderators’ role to remove posts on the basis of “truth” or “accuracy. “
21. That by failing to stop the moderators’ stock and shareholder manipulation scheme in its DRWN forum after notice to InvestorsHub, InvestorsHub again violated its own user and moderator terms that stated “it is not the Moderators’ role to dictate bullish or bearish sentiment, to insist the “tone” of the content be along any particular investment sentiment, or to favor one investment sentiment over another.“
22. That InvestorsHub’s facilitation of the manipulation scheme and its failure to safeguard the investors on its website from its MODERATORS has made InvestorsHub partly liable for the wrongful conduct of Pennymachine and Magu as a co-conspirator.
23. That 47 U.S.C. 230 does NOT provide InvestorsHub any immunity from the bad conduct of its MODERATORS/AGENTS. Sect. 230 was enacted to protect forum operators from third-party postings who they did NOT control. However, Sect. 230 was NOT meant to protect these forum operators from the tortious conduct of their own moderators/agents who they controlled. Therefore, InvestorsHub is liable for the stock and shareholder manipulation scheme perpetuated by Pennymachine and Magu within its DRWN forum.
“Bodybuilding.com gives its moderators actual and express authority to delete posts of forum users and to ban forum users for violations of the terms and conditions of forum use, and thus moderators are agents of Bodybuilding.com….As a principal, Bodybuilding.com “is responsible for the acts and agreements of its agents which are within their actual or apparently authority. “
Cornelius v. Bodybuilding.com, LLC
U.S. District Court, D. Idaho. June 1, 2011, Not Reported in F.Supp.2d 100 U.S.P.Q.2d 1483