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Updating NR: The Gaming Factory SEC Fraud

Discussion in 'Gaming Floor' started by mary, Dec 28, 2002.

  1. mary

    mary Dormant account

    From RGT Online yesterday (27 May)

    The SEC filed a civil lawsuit last month against The Gaming Factory, alleging a pattern of fraud. That prompted a federal judge to sign an injunction freezing the company's assets -- a move that The Gaming Factory's attorney concedes likely will be a fatal blow to the business - gaming software developers and operators of the online casino You must register/login in order to see the link. and You must register/login in order to see the link.

    A court-appointed receiver is attempting to track down and return investors' money. The SEC also is seeking unspecified fines against the company. No criminal fraud charges have been filed against The Gaming Factory, and SEC officials would not reveal if such an investigation is under way.

    The company operated web sites at You must register/login in order to see the link., You must register/login in order to see the link. and You must register/login in order to see the link.. The Gaming Factory was scheduled to open its online casino in the Fall of 2001, however the launch of a casino site was delayed until January of this year. The casino was alleged to be licensed in Panama; while the company operated in Florida and Costa Rica. According to domain registration services, all of the web sites are registered to the law firm "Shook, Hary & Bacon LLP" in Miami, Florida. Michael Tein is the contact listed for each of the sites in Verisign's registration databse.

    The Gaming Factory's marketing representative Shannon Diem, was also mentioned in the SEC allegations of fraud. Diem was not listed as a defendant, however the SEC document stated that "... The PPM also misrepresents the background of TGF's purported director of marketing, Shannon Diem ("Diem"). The management section of the PPM states that Diem was the president of Internet Marketing Group, Inc. ("IMG") from approximately May 1997 through November 1999. The PPM also claims that IMG developed online advertising and marketing campaigns for, among others, "Disney," "Ford Motor Company," and "Carnival Cruise Lines." Diem was not the president of IMG and neither he nor IMG ever had any relationship with The Walt Disney Company, Ford Motor Company or Carnival Corporation.

    " ... The PPM also misrepresents Diem's educational background. The PPM states that Diem was accepted in the Fall of 2000 to the Wharton School of Business at the University of Pennsylvania ("Wharton"). Diem never applied nor was accepted by Wharton for the Fall of 2000 or any other year. '

    Diem is attempting to resell pre-purchased advertising space and a database of approximately 1000 "gamblers both for-fun and real money".

    As reported by the South Florida Sun Sentinel: "The cyberspace casino was pitched to prospective investors as a winner, a chance to plunk down some money and rake in the profits from gambling's new frontier.

    "With hopes of such jackpots, about 75 investors nationwide invested more than $1.9 million within 16 months in the company with a glitzy Web site and a 27-year-old president who trumpeted his knowledge of Internet business.

    "But federal authorities say The Gaming Factory was a bad bet -- a West Palm Beach-based operation that used a steady stream of lies, exaggerations and high-pressure sales tactics to lure investors. People were duped into believing they would walk away with astronomical returns on virtually risk-free investments, the U.S. Securities and Exchange Commission alleges.

    "Potential investors were told as early as July 2001 that the company already was making a tremendous profit even though its Internet site didn't start taking bets until January.

    "The Gaming Factory's president, Richard Onorato of Lake Worth, exaggerated his business experience and failed to disclose to investors that Pennsylvania authorities previously forced him to stop selling unregistered securities in that state.

    "Court documents indicate investors in The Gaming Factory bought as little as $2,000 of the company's unregistered stock and as much as $400,000.

    "One of those investors was Ruby Steele Morris of Canton, Mass., who took out a second mortgage on her house and used credit cards to invest in The Gaming Factory. Court documents indicate she invested $35,000 in three separate payments, but she said she invested $50,000.

    "Morris estimates sales representatives from The Gaming Factory called her more than 50 times last year.

    "Joseph Fergus, a Mattapan, Mass., investor, thinks the $6,500 he put into the company is `money down the drain.

    "SEC attorneys allege The Gaming Factory operated in `a typical boiler room fashion with up to 10 unlicensed sales representatives cold-calling prospective investors. Onorato was `the mastermind behind the fraudulent scheme, because he ran the office, the SEC asserts. 'During a five-week span, three sales representatives of The Gaming Factory tried to drum up business from a woman who played the role of a wealthy widow named Sylvia Harding.

    'Transcripts of the conversations detail the pressure put on her as salesmen pushed her to buy up $200,000 worth of stock".
     

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