CMKM Diamonds Inc. (fka CMKX)

[dia duit]

Here's an article in thestreet.com by Gary Weiss.

Thanks a bunch to medcal on RB for posting the story. medchal posted the excerpt about CMKX but, it is worth reading the entire article.

http://ragingbull.quote.com/mboard/boards.cgi?board=CMKI&read=988543

By: medchal
17 Jan 2011, 10:40 AM EST
Rating: Msg. 988543 of 988545

From an article on thestreet.com today:

http://tinyurl.com/4kz63mn



http://www.thestreet.com/story/10973626/1/50-cent-adds-to-internet-horrors.html

50 Cent Adds to Internet Horrors

By Gary Weiss

NEW YORK (TheStreet) -- Do we need any more reminders that stock message boards are minefields for investors? That they are happy hunting grounds for stock promoters, paid stalkers and assorted shills? Just look at a news item that's been all over the press and you can see what I mean.

There were plenty of amusing articles in the press in recent days about a drug company's appearance before the Supreme Court. The company is Matrixx Initiatives, and the cause of the merriment was Judge Antonin Scalia asking a government lawyer if he believed in "Satan."

Matrixx is accused of not promptly disclosing reports of serious side effects for one of its products, and the company raised a parallel with the old rumors that Procter & Gamble(PG) was in league with the Devil. If Procter & Gamble didn't have to disclose those stupid rumors, why did Matrixx have to report on stupid, "unreliable" reports about the harm caused by its Zicam cold remedy, even when the dang things turned out to be true?

Funny, huh? Well, I guess you had to be there.

After laughing for several minutes over this, I remembered that there was something about this situation that was even more of a knee-slapper. One of the "initiatives" in Matrixx's corporate mission is its aggressive effort to get ordinary people to STFU about the company on stock message boards. To me that's as big a deal as not disclosing stuff to investors, but it wasn't before the Supreme Court. That's because there's no money in it for private litigators, and our government doesn't give a hoot.

But Matrixx sure gave a hoot, so it sued a bunch of people in 2002, including anonymous message-board posters, claiming that they were unfairly disparaging the company. The suits received little attention in the media while they were dragging through the courts. Why should they? After all, only small fry were involved -- a crummy little company and some ordinary people yapping on message boards. Who cares about their free-speech rights?

One of the message-board posters identified in the suit was a persistent Internet gadfly named Floyd Schneider. Floyd started posting about the dangers posed by Zicam, he tells me, after he found a Yahoo(YHOO) group composed of people claiming their sense of smell was impeded by use of the product. So he and others banged away on the subject long before the media picked up on it.

Here is a typical post by Floyd in 2003, while the suit was still under way. Matrixx vigorously reaffirmed the safety of Zicam in press releases like this from early 2004, denying a report by Carol Remond of Dow Jones News Service and specifically mentioning Floyd.

I tell you, these people are sweethearts. Aside from bringing its legal guns to bear against people in pajamas posting on the Internet, it sent its crackerjack legal team to badger an independent research analyst who also committed the crime of telling the truth about Matrixx and Zicam. Thanks to superb lawyering by the Matrixx lawyers and the resulting legal fees for the defendant, the analyst went out of business in 2005.

Got to admire Matrixx for its moxie. This fine example of American business kept up a brave front right up till the moment in 2009 when the FDA issued a warning telling people to chuck any Zicam they may have in their medicine chests --because it might destroy their sense of smell. Yep, this is the same thing that those message-board people were gabbing about years before.

The lawsuit against the message-board people was dropped, naturally, but it didn't matter. It had cast a nice, fat chilling effect on online freedom of speech, shut down an independent analyst and caused Floyd to incur legal fees of $30,000. Sure, you can sue for vexatious litigation in such circumstances. Try it sometime and see what it gets you. Floyd did, and the case was tossed out.

If you need any more evidence of the kind of horror the Internet has been for investors, a couple of other recent tidings come to mind. There's the tweet by the rapper 50 Cent that sent a penny stock called H&H Imports(HNHI) soaring the other day. There's the latest news from one of my favorite penny stock frauds, CMKM Diamonds. The feds are saying in court papers that millions of unregistered shares in this dumb little non-company were being sold as recently as Jan. 3 in an Internet chat room.

CMKM is one of the truly fascinating stories of Internet stock hype, an outright fraud (if you believe the federal indictment of its former CEO, the fugitive Urban Casavant) that won a devoted following of naive shareholders who blamed the company's woes on "naked short sellers." The SEC is pushing something called "investor education," but -- judging from the recent brisk sales of its worthless stock -- it's clear that some investors need a brain transplant, not education. And not just CMKM bagholders. There are the people who listened to this genius who explained on the shill-infested Investor Village message board how they could use credit-card advances to buy into NovaStar Financial, a disintegrating subprime lender.

Anyway, the sad and strange story of Matrixx is finally coming to court, if the Supreme Court lets the case move forward. The issue before the high court, which is hearing an appeal of an investor class-action suit, is whether Matrixx should have been more prompt in disclosing reports that Zicam caused customers to lose their sense of smell. Since this is a class-action suit, a legal victory is likely to mean massive fees for the shareholder lawyers and only a pittance for shareholders.

Floyd doesn't care. He has bought a share -- right, one single share -- of Matrixx, and is lead plaintiff in another class action that is fighting the company's acquisition by HIG Capital LLC. I hope this gets to the Supreme Court. Maybe this time Scalia will ask the lawyer for Matrixx if he believes in the Devil known as the First Amendment.