Digital Gas, Inc.(fka DIGGQ)

[Buckey]

2006-11-17 21:02 ET - Street Wire

From Street Wire (C-*SEC) U.S. Securities and Exchange Commission


by Mike Caswell

The U.S. Securities and Exchange Commission has halted Digital Gas Inc., a Canadian-connected pink sheets listing, for allegedly inaccurate news. The halt, which came Friday, follows civil fraud charges filed last month by New Jersey Bureau of Securities, which claims Digital Gas was a pump-and-dump that lasted over two years.

That suit names Toronto lawyer William Brown and New Jersey businessman Brian Smith, who allegedly sold Digital Gas shares through nominees while writing bogus news releases. Prosecutors say they manipulated the price and demand for Digital Gas for their own benefit.

"Digital Gas was little more than a front for Brian Smith's illegal activities. Smith enriched himself at the expense of investors," said Stephen Nolan, acting director for the New Jersey Division of Consumer Affairs.

Mr. Smith allegedly used money from stock sales for renovations on his home, among other things. "Smith and Brown went to great lengths to rip off honest investors for their own personal benefit," said New Jersey Attorney General Stuart Rabner.

The stock reached a 52-week high of $1 this April as the company touted a deal with Halifax-based Pyrolmulsion Petroleum to convert "hydrocarbon waste streams" into environmentally friendly fuel. Then the company announced a wind energy deal based on "breakthrough ultracapacitor technology" that would outperform all other wind power systems. (All figures are in U.S. dollars.)

Meanwhile Mr. Smith and Mr. Brown were selling the stock, through a network of nominee shareholders, prosecutors claim.

Digital Gas, which was around 50 cents this summer, last traded at 10 cents. Prosecutors allege the company has no known bank accounts or revenue.

The company denies the allegations. In a news release, Digital Gas said it intends to fully co-operate with authorities. "The company believes that these allegations are without merit and will vigorously defend the interests of its shareholders," the company said.

After the New Jersey charges came out last month, the company carried on, business as usual, it appears. One week later, it announced a deal with a Detroit company to invest in a tire recycling project.

It seems that earned it some attention from the SEC.

In today's halt notice, the regulator says the tire recycling news release may be misleading. While it does not give details, it claims there are questions about its accuracy. "The commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of [Digital Gas]," the SEC's notice reads.

The company could not be reached for comment. Its investor relations number takes callers to an answering machine with no more room for messages.

The halt expires in 15 days, unless the SEC extends it.