More Than $550,000 for Investor Redress; $2 Million Bond Required
Internet gambling casino developers charged with using deceptive claims to sell stock in their business have agreed to settle Federal Trade Commission charges that their practices violated federal laws. The proposed settlement will bar deceptive claims in the future, require more than $500,000 to be returned to investor-victims, and require the defendants to post a $2 million bond prior to engaging in, or assisting others engaging in, the promotion, advertising, marketing or sale of an investment in any company that owns or intends to own an online gaming entity.
Bohemia, New York based World Interactive Gaming Corp. and its principals, Jeffrey Burton and Lawrence Blocker, d/b/a/ James Lawrence and Associates, were parties to the settlement.
This case was part of the FTC's August 1998 "Project Risky Business" sweep against deceptive entertainment and media-related investments. The FTC alleged that World Interactive Gaming Corp. and its principals used high pressure telephone sales pitches and false claims to lure investors into purchasing units of 2000 shares of World Interactive Gaming stock, at a cost of $10,000 per unit. In their sales pitches, the defendants combined the popular appeal of the Internet and blatant false claims about the profitability of the casino industry generally and the Internet gaming industry specifically to induce the investment. The FTC charged that defendants falsely claimed that Wall Street brokers had valued the company's stock, that the stock would easily fetch $40 per share at an initial public offering in the company's first year of operation, and that there were no laws prohibiting Internet gaming. The agency alleged that the defendants had falsely claimed that the casino would make $100 million in its first year of operation, and that, with just that one $10,000 investment, investors could earn more than $150,000 in a year - an astronomical 1,470% return. Consumers invested approximately $1.8 million in the deceptive venture.
In addition to the $550,000 consumer redress and $2 million bond requirements, the proposed settlement, which requires the court's approval, would bar Burton and Blocker from misrepresenting the nature and quality, likely return, associated risk or other any other material facts regarding any investment. The settlement bars the use of aliases and bars the defendants from selling, renting or disclosing their customer list. The proposed settlement also contains various record keeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance. The proposed order imposes a judgment of $1.8 million suspending payment of all but $813,049 frozen by the court in conditional settlement of the judgment, based on financial declarations provided by the defendants. Of the $813,049, $550,000 will be available for consumer redress. Should the court find that the defendants misrepresented their financial situations, the entire $1.8 million becomes due. A separate proposed default judgment against another defendant, Gregory Flemming, similarly enjoins him, imposes a $1.8 million judgment, and requires a $2 million bond before he markets any investment.
The Commission's vote to approve the filing of the proposed consent judgment was 5-0. It and the proposed default judgment were filed by the FTC in the United States District Court for the Eastern District of New York on November 9, 2000, and are awaiting court approval.
NOTE: The consent judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Judgments have the force of law when signed by the judge.
Copies of the proposed judgments in this case will be available shortly. Copies of the documents associated with "Project Risky Business" are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
Claudia Bourne Farrell
Barbara Anthony, Director or Carole A. Paynter
Northeast Region - New York
(FTC File No. X980073)
(Civil Action No: CV985115 (JS))