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Prosecutors: 2 Men Made $1M in Scam

February 25, 2000

NEW YORK (AP) _ Two men exploited ``the dark side of the Internet″ when they made more than $1 million by driving up the value of penny stocks with a flood of e-mails disguised as if they had been sent by America Online, a prosecutor said Thursday.

U.S. Attorney Mary Jo White announced the securities fraud charges against James Sheret Jr. and Glenn Conley in connection with a nationwide, Internet-based scheme involving about 60 companies.

``This is the dark side of the Internet,″ White said in a statement. ``Determined fraudsters can swindle a virtual audience by taking large positions in thinly traded stocks, disseminating hundreds of thousands of spam e-mails touting these stocks and then sell them into the fraudulently inflated market they have created.″

She said the method of cheating investors was similar to what goes on in so called boiler rooms, where dozens of stock brokers at a time pitch stocks to investors to drive up prices.

She said the boiler room scam ``takes on a new dimension because of the ability online to reach thousands, if not millions, of investors with a single keystroke.″

``Whether people commit these crimes in cyberspace or in office space, we will identify them, we will find them and we will prosecute them,″ White said.

Lewis Schiliro, assistant director in charge of the FBI’s New York office, said the case ``represents the marriage of an old scheme with modern technology.″

``Unscrupulous stock manipulators should be on notice that, to the law enforcement community, it’s the message, not the medium, that matters,″ he said.

Sheret, 31, of Bayside, Queens and Conley, 31, of Gaston, Oregon, allegedly operated the fraud from November until earlier this month, making themselves $1.13 million in illegal profits, prosecutors said.

They allegedly sent hundreds of thousands of e-mails touting the investment prospects of thinly traded, largely dormant microcap companies whose stock they had purchased.

Then they disguised the e-mails to make them appear as if they had been sent by Internet service giant America Online Inc., authorities said.

A criminal complaint alleged that the men fraudulently opened e-mail accounts through 23 Internet service providers around the country and used false information to conceal their identity.

The false names, addresses and telephone numbers made it difficult to determine the source of the bogus e-mails, prosecutors said.

The Securities and Exchange Commission also brought civil charges against the men.

If convicted, they could face up to five years in prison and a maximum fine of $250,000 or twice the gross gain resulting from the offense.

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