Spooz, Inc. (Pink Sheets: SPZI) 60. Spooz, Inc. (‘Spooz”) is a Chicago-based corporation that purports to provide add-in software programs for the financial trading industry.
61. On or about August 29, 2005, Spooz issued 21.8 million shares of common stock to the Useltons as part of a purported Rule 504 offering. These shares were issued without restrictive legends. During September 2005, the Useltons transferred 9.8 million Spooz shares into two accounts they controlled.
62. Between approximately October 13 and October 27, 2005, the Useltons orchestrated a spam email campaign touting Spooz. The spam emails described Spooz as the “hot pick this week” with a current price of $0.03 and a 1 week target of $0.15 to $0.20. The spam emails also referred to earlier successes, noting that the “last pick was up 80 percent in 2 days this one is expected much higher.”
63. The overwhelming majority of spam emails touting Spooz stock contained no disclaimers. Spam emails circulated from October 14 through October 27, 2005 did not contain any disclaimer. While spam emails disseminated on October 13, 2005 did purport to include a “disclaimer” statement, they did not disclose the Useltons’ role in the promotion nor their intent to sell. The principal spammer charged the Useltons at least $143,871 for the Spooz spamming campaign.
64. During the Spooz spamming campaign, the Useltons sold over 6.3 million shares of Spooz stock, realizing proceeds of over $267,289. The price of Spooz common stock, which generally ranged between $0.011 and $0.023 from June through August 2005, rose to a high of $0.052 on October 17, 2005. Daily trading volume, which never exceeded 500,000 shares between June and August 2005, soared to 11,473,538 shares on October 14, 2005.
65. After the spamming campaign, Spooz stock dropped to below $0.02 and reached a low for the calendar year of $0.0065 on December 14, 2005.
In response to the allegations:
61. Uselton admits that companies he controlled obtained shares of Spooz, Inc. (“Spooz”). Uselton lacks sufficient information to admit or deny the remaining allegations of Paragraph 61.
62. Uselton denies the allegations of Paragraph 62.
63. Uselton denies the allegations of paragraph 63.
-7- 64. Uselton admits that companies that he controlled sold shares of Spooz in the open market at a profit but lacks sufficient information to specify the time of said sales or amount of said profit. Uselton lacks sufficient information to admit or deny the remaining allegations of Paragraph 64.
Here are the consent agreements by both defendants. They don't actually admit to any wrongdoing, but they do promise to never again violate the law, not participate in penny stock sales, and refrain from saying or doing anything that would actually deny the allegations in the lawsuit. And Darrel Uselton has to pay a bunch of money (which varies depending on how much he loses to the state of Texas in The State of Texas v. Approximately $4,238,866.72).
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