A California man and his company have been accused by the SEC of running a “Fraudulent Touting” scheme that pumped the penny stock of Praebius Communications, a company the alleged AdSurfDaily Ponzi scheme once claimed would generate $200 million for its coffers through a joint “advertising” venture.
Charged by the SEC with fraud were Songkram Roy Sahachaisere and InvestSource Inc. of Huntington Beach. The Praebius stock was pumped by Sahachaisere as part of what the SEC described as a “massive” email and newsletter scam.
“Between January 1, 2008 and March 31, 2009, InvestSource sent nearly 450 email messages to over 24 million recipients,” the SEC charged.
Praebius was one of seven InvestSource clients whose stock was pumped and dumped to generate illegal profits of more than $276,000, the SEC charged.
The timing of the alleged touting scheme, according to records, coincided with dates in October 2008 in which ASD, an autosurf company, was announcing a purportedly lucrative joint venture with Praebius. ASD announced the prospective deal on Oct. 29, 2008. During the same time period, ASD was awaiting a key court ruling on whether it had demonstrated at an evidentiary hearing earlier in October that it was operating lawfully. Using a headline of “ASD-Praebius Venture” on its now-defunct Breaking News website while awaiting the ruling, ASD said it expected to garner revenues of about $200 million “over the first several years” from Praebius.
The SEC now says Sahachaisere and InvestSource were pitching Praebius stock during the same month, declaring their business practices to be “Fraudulent Touting” because they “failed to disclose that they were selling the very securities they were recommending investors buy.”
Sahachaisere and InvestSource received 4.1 million shares of Praebius stock between Oct. 2, 2008, and Nov. 25, 2008, the SEC charged.
The scheme involving Praebius netted $49,215 for Sahachaisere and InvestSource, the SEC said.
Five of the seven stocks — including Praebius — experienced “significant increases in trading volume during InvestSource’s promotions,” the SEC said.
ASD’s name is not referenced in the SEC complaint, and Praebius was not listed as a defendant in the case. Praebius is referenced in the case as a client that paid InvestSource and Sahachaisere in stock “to provide investor relations services.”
One of the issues in the ASD Ponzi case was whether the company had revenue streams adequate enough to pay “rebates” to members of 1 percent a day or 365 percent a year for viewing “advertising.” During the evidentiary hearing, ASD never produced audited, certified financial statements to prove it could sustain the rebates. Prosecutors described the company as catastrophically insolvent and reliant on revenue from new members to pay “rebates” to older members in classic Ponzi scheme fashion.
Less than a month after an evidentiary hearing concluded on Oct. 1, 2008, ASD announced the purported joint venture with Praebius. Critics immediately questioned both the $200 million figure quoted by ASD and the timing of the announcement because Praebius did not publish verifiable financial data and ASD was described by federal prosecutors in the Ponzi scheme case as hopelessly under water.
Although ASD purported to be a professional communications firm, its announcement of the purported $200 million deal did not quote executives of either ASD or Praebius. The announcement led to questions about why Praebius would knowingly associate its name with a company suspected of operating a massive, international Ponzi scheme while it allegedly also engaged in wire fraud and money-laundering while selling unregistered securities.
Some ASD critics saw the announcement as a cynical means of instilling hope in ASD members that all was not lost while signaling to a federal judge that ASD had a major, new client that single-handedly could wipe away the firm’s alleged insolvency. Even as critics were voicing concerns that ASD was advancing yet-another story that was too good to be true, members of the now-defunct Pro-ASD Surf’s Up forum were cheerleading ASD’s purported revenue infusion from Praebius.
Some ASD members sprinted to forums to announce the news, but the information could not be verified. ASD later removed the announcement from its website.
According to the SEC’s complaint against Sahachaisere and InvestSource, nearly 4.5 million shares of Praebius traded hands between Oct. 7, 2008, and Jan. 27, 2009, generating less than $50,000 in revenue.
ASD never explained how Praebius, which did not publish verifiable financial data, could generate the $200 million ASD cited in the announcement.
Less than a month after ASD issued the Praebius announcement, a federal judge ruled ASD had not demonstrated at the evidentiary hearing that it was operating lawfully and was not a Ponzi scheme. By Dec. 19, 2008, federal prosecutors had filed a second forfeiture case against ASD-connected assets, again citing Ponzi allegations.
Even as prosecutors were filing the second Ponzi complaint, Surf’s Up members were claiming that the government secretly had admitted ASD was not a Ponzi scheme.
