Cole Bartiromo, the Mission Viejo 17-year-old accused of swindling more than $1 million from investors in an online sports-betting scam, was charged with a second civil fraud Monday: an Internet stock-trading scheme that allegedly made him a profit of at least $91,400 last year.
Federal regulators said Bartiromo bought stock in at least 15 companies, then flooded Internet message services with phony reports--typically about purported takeovers--in an attempt to drive the shares higher.
If the stock price rose--and it usually did--Bartiromo would cash out, regulators said.
"In every instance, Bartiromo also sold his stock prior to the occurrence of the positive event predicted in his messages," the Securities and Exchange Commission said in a second amended complaint against the teen, filed in federal court in New York.
Bartiromo and his lawyer, David Bayless, could not be reached for comment Monday.
The SEC's initial suit against Bartiromo, filed in January, alleged that he took in more than $1 million in a scheme called Invest Better 2001. The program, which operated in November and December, promised online wagerers "guaranteed" returns of 125% to 2,500%.
Bartiromo already has returned $1.2 million, mostly from a Costa Rican casino.
He could have challenged the addition of the new charges to the SEC's suit Monday but didn't, said Alexander M. Vasilescu, an agency attorney working on the case.
The alleged stock scam, a "pump and dump" scheme, took place six months earlier than the sports- betting program, the SEC said.
The case is similar to one involving another teenager, Jonathan Lebed of New Jersey, who agreed in 2000 to repay $285,000 obtained in what investigators said was a scheme using phony online messages to drive up stock prices.
From May of last year through early July, Bartiromo traded several million shares of stock, the suit says. He used an "anonymizer" service to conceal his identity while sending more than 6,000 messages.
"We were very surprised by the volume of the messages and by the sophistication," said Nick Monaco, the branch chief for Internet enforcement at the SEC's southeast regional office in Miami, which investigated the case.
Bartiromo was too young to have a brokerage account, but his father authorized the teen's use of the father's Ameritrade Inc. online account, depositing $60,000 into it in spring 2001, the SEC said.
Bartiromo mostly bought thinly traded "penny stocks," then disseminated false information on the Yahoo Finance and Raging Bull Web sites, the SEC said.
The complaint describes how he posted messages June 9 saying CNBC had given a $15 "target price" to shares of Call Solutions Inc., then trading at 7 cents. Other messages said EarthLink Inc. or AOL Time Warner Inc. would buy Call Solutions in a deal to be announced after trading June 11. Before trading ended that day, Bartiromo sold his Call Solutions shares at prices ranging from 12 cents to 25 cents, the SEC said.
The SEC said Bartiromo tried to influence trading in at least one big-name stock: Broadcom Corp., the chip firm based in Irvine, a few miles from Bartiromo's home. The complaint provided no details.
The SEC caught up with Bartiromo July 3, when officials contacted him and obtained assurances from him--and his father--that he would stop posting false messages on the Internet, the complaint says. Despite the promises, the suit contends he posted a round of false messages July 5.
Vasilescu said the SEC expects to complete the discovery phase of its suit by June 1 and hopes to work out a settlement by midsummer. In addition to being required to repay any fraudulently obtained funds, Bartiromo could be fined.