The U.S. Securities and Exchange Commission has charged former CEO of Seattle-based Infinium Labs Timothy Roberts for running a scheme to artificially inflate the company's stock.
The SEC alleges that Roberts authorized promoter Michael O. Pickens to run a fraudulent "junk fax" scheme by sending faxes to potential investors across the country as way to make it appear as if the company, notoriously known as the force behind the theoretical Phantom Game Service, was about to launch a new game console. In fact, at the time the faxes were sent out, the company lacked the financial backing to manufacture or market the system.
Pickens was previously charged by the SEC for a similar but separate scheme to "manipulate the stock of Infinium Labs and several other small-cap companies through a series of fraudulent faxes."
According to the complaint, the faxes falsely represented the company, indicating that Infinium Labs' stock price would increase as much as 3,000% in the coming weeks, and that Infinium Labs was run by an Xbox developer. The scheme ran for four months, during which Roberts took advantage of the company's artificially inflated stock price and sold more than 1.3 million shares of his own stock in the company, pocketing $422,500 in the process.
The complaint also alleges that Roberts paid the promoter of the fax scheme 4 million shares of his own Infinium Labs stock without reporting the transaction. As penalty for his actions, the SEC is asking the District Court to force Roberts to "disgorge his ill-gotten gains plus prejudgment interest, impose a civil money penalty, and bar him from participating in penny stock offerings and from serving as an officer or director of a publicly-traded company."
Infinium Labs, which is now disassociated with Roberts at a management level, secured a $5 million finding agreement
from Golden Gate Investors in January, and in April announced a deal
with with hardware manufacturer Itron Technology to manufacture the Phantom Lapboard, a combination keyboard/mouse peripheral for PC gamers. To date, neither the Lapboard nor the Phantom Game Serivce have been released.