Almost 20 years ago when I was 21 years old, I was involved in the stock market and publicly stated a company’s stock price would increase by about +900%. The judge thought it was absurd, and I was sentenced to 3 months in prison. Later, my predictions came true and the stock price increased by +1,500% but it was too late. I was right about the price increase, but I unintentionally published information about the company which wasn’t accurate. I was charged with “recklessly publishing inaccurate information”. What I did was a honest mistake and victim-less crime. I did not cheat anyone out of money as other people want you to believe. Anyone who followed my “illegal” advice would have made a fortune.
At the time, my promotional company was one of the top 3 in the world and was well known. I was approached by a company to promote their public shares on the NASDAQ exchange. They offered me company shares in exchange for my promotional services. When I publicized this new service I offered, other companies approached me with similar arrangements. Basically I received “stock options” from clients (company shares), and I was able to either keep or sell the shares once they reached a certain price. For example, a company would pay me $200,000 in stock options at $1 per share, but I could only sell them when the value reached over $2 per share.
I was only about 20 years old at this stage and barely knew what shares were. Essentially all I knew was that if you promote stock by convincing investors that the company had strong potential for growth, people buy shares in the company, and the shares increase in value. I didn’t know anything about dividends or what the shares actually represented. Essentially, the company sent me press releases which I promoted. I conducted numerous such promotions with the word of my success spreading quickly to other companies wishing to promote their stock.
In addition to the shares I received as payment, I eventually began to also buy shares from my own money because I knew the effect of my promotions.
Typically to promote shares, I would research various companies with the following criteria:
- Positive company news that indicated developments are likely to increase the company’s profits: although I didn’t understand it at the time, I knew if a company was expected to increase its profits, more investors would purchase shares and the share price would increase.
- Previous negative company press releases that investors over-reacted to by selling shares: This created undervalued stocks. I would look at particular company press releases and the respective dates of release, then see how the stock price was affected in the following 3-6 months. For example, company news may indicate its revenue will drop by 5%, but the stock price may have dropped by 15% as a consequence of the company news.
- Initially undervalued stock price: such shares have greater potential to increase in value when more investors read the press releases I promote.
There was a variety of other factors I considered. I was still very new to the stock market but learning very quickly, although was not aware of how strictly regulated it was by authorities such as the SEC and ASIC. As far as I was concerned, ASIC was a shoe.
When I selected a company for promotion, I basically promoted precise copies of the company’s most positive press releases. This basic approach earned me approximately $30,000 per promotion, and I was able to do such promotions frequently. At only 20 years of age, I was earning quite a bit. However, one particular promotion taught me a lesson in being careful about what you publish.
As associate suggested a list of companies for me to consider. One of them was “Rentech” and after conducting my own research, I believed it had enormous potential for growth. Therefore I created a summary of the company’s most favourable press releases, and commenced a promotion. The material I published was based on the following facts:
1. Rentech generates revenue by licensing patented technology
2. Rentech had a pending patent for new technology.
3. Rentech was facing delisting from the NASDAQ stock exchange because their share price had fallen below the minimum required value. Therefore, Rentech asked NASDAQ for a time extension to make several important announcements that they believed would sufficiently increase their share price, and keep them on the NASDAQ exchange. NASDAQ granted Rentech the extension after a hearing, so clearly they were satisfied that the pending announcements were likely to increase the share price.
4. The company’s representative (Mark Koenig) personally told me they did indeed have critical positive news that will soon be released, although details were confidential at the time.
5. Rentech’s technology is widely used by large companies including Texaco oil company. Therefore Rentech’s new technology may be extremely profitable for them.
Based on these facts, and emails sent to me by director Mark Koenig, I believed that Rentech was going to announce revolutionary new technology that would be used by Texaco and other oil companies, and that this will dramatically increase its share price. It may be a clumsy assumption, but at 21 years old, I believed it was reasonable. And based on all factors and my experience to this point, I believed Rentech’s share price would increase by over 900% in time, and I published my beliefs throughout the Internet.
The reality was that Rentech did indeed have multiple positive announcements scheduled for release that were likely to increase the share price, just as Rentech’s directors themselves said. And they did have a pending patent. But their announcements had nothing to do with Texaco. So the core of the case was I published my assumptions which were not quite correct.
My initial promotion of Rentech would increase the share price in the short term, but the majority of the increase was expected after Rentech’s expected announcements we made. The material I published was more intended to have people watching Rentech’s announcements to verify my beliefs, which is why the material I published claimed there was “imminent outstanding news” the company would soon release. So I intended to sell my shares some time after Rentech’s announcements. This would have been perfectly legal if I had only published exact copies of Rentech’s press releases, instead of including my assumptions as I did.
After my promotion, message board postings from investors indicated I had made a mistake, although at the time I did not know what it was. In panic, I sold all my shares and made only a small profit. At this stage I conducted my business as usual. Eventually though I was charged by ASIC who alleged that I deliberately misaligned facts to mislead investors. They also claimed that my 900% price rise prediction was absurd and purely to mislead investors. Initially I was charged with “intentionally” making misleading statements to induce investors to purchase shares. But after meeting with ASIC to explain what happened, the charge was downgraded to “recklessly” making misleading statements. As publishing my assumptions was arguably “reckless” regardless of my young age, I pleaded guilty and served 3 months.
What about the stock price of Rentech? Did it increase like I said?
In my promotional material, I stated I believed the stock price would increase by about 900%. Shown left is what it did. From the price at which I purchased the shares ($0.33) to the 10 year high ($5.3) is over a 1500% price increase – almost double the increase I stated. The phenomenal price increase lasted over a year and occurred some time after my promotion, so it clearly had nothing to do with my actual promotion. Unfortunately this occurred after my sentence, so it couldn’t be used as evidence.
If I had held onto my stock and sold at the optimal time, I would have profited approximately $800,000.
Additionally, ASIC alleged that the victims of my crime were the investors. But the reality is any investor who took my “unlawful advice” and purchased the shares and sold at the right time, or still held shares today, would have profited substantially.
Despite me being up-front and honest about what happened, as you can expect, “people with agendas to discredit me” distort the facts of this case to portray me as a dishonest scammer that went to jail. But what happened nearly 20 years ago when I was close to a teenager is no indicator of the effectiveness of my technology. Of course “competitors” know this, but would they care? Additionally, ASIC knew about the other stock promotions I conducted, but I was only charged with this promotion because it was the only time I published inaccurate assumptions instead of precise copies of company press releases.
Nevertheless, regrettably, not everything was innocent. For example, I falsely claimed that “analysts” had made the predictions when it was in fact me. However, I was not charged for this. Additionally, under a fabricated name, I posted messages on chat forums encouraging investors to investigate Rentech’s company news and purchase shares. Although these postings were designed to encourage investors to research Rentech, not to mislead them. Otherwise, I truly believed in the accuracy of my claims and honesty of my actions – specifically that Rentech will be announcing news that will dramatically increase its share price. And I was correct about this, with the share price increasing by approximately 1500%.
Again this happened nearly 20 years ago when I was quite young and inexperienced, but involved with strict regulations of the SEC and ASIC. I accept that I made mistakes and learned from them. But this case is more a matter of publishing clumsy assumptions as an adolescent, rather than deliberate deception. Unfortunately various people use these events against me for their benefit, without consideration of the truth.
If you ignore the details and just focus on the thought “gee he went to prison and must be a fraud”, goodbye and goodluck. The chances are are anyone with the right mindset for finding the truth about my roulette prediction technology would have already called me and arranged a personal demonstration, so they can see everything for themselves.