I've been trying to pin down MyDD founder Jerome Armstrong's stock-related activities in 2000, when the SEC alleges that he touted a Chinese Linux company called Bluepoint on Raging Bull without disclosing that he'd received $20,000 in stock from the company's management.

Though Armstrong's message board postings related to Bluepoint are no longer available on Raging Bull, I found dozens of messages on the InvestorsHub site in which he promoted a related company before a merger, never revealing he was issued 25,000 shares in the deal.

An SEC filing reveals that Armstrong received the shares in a reverse merger executed by the Chinese wireless startup AccessTel, which acquired a publicly traded online mall called Shopss.Com on Dec. 18, 2000.

From September 2000 to March 2002, Armstrong posted 95 messages using the account myDDdotcom on AccessTel's InvestorsHub board. He predicted great potential for its technology and a big increase in price, deriding critics as "bashers." He never mentioned his relationship with the company, which was formed by some of the same executives who created Bluepoint.

On the same day as the merger, Armstrong announced that he had just bought 250 shares of the company:

... i did DD call quite a bit this weekend, and am satisfied to continue holding, patient for their plan to become widely known. Today I just bought a whopping 250 shares in my son's (Jackson) educational IRA that I just set up for the toddler, hope it grows as much as he is.

Before Armstrong's SEC case went to court, he reached a December 2003 agreement with the commission to provide testimony in related investigations and never engage in stock touting. He did not admit guilt but is prohibited from denying the charges:

Defendant agrees (i) not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis ...

The agreement makes it unlikely that Armstrong will eventually "go on the offensive" to answer these charges, as Daily Kos founder (and business partner) Markos Moulitsas asserted last week in a private mailing list post to liberal bloggers. If Armstrong does, even through intermediaries, it'll reopen the case against him.

The SEC's suit alleged that he touted Bluepoint on Raging Bull when it began to trade publicly in March 2000, receiving stock in three companies at below-market prices. He made at least $20,000 selling the shares, the commission estimated, and none of his posts revealed that he was being compensated.

Armstrong denied the allegations in an August 2003 court filing, but his denial confirmed that he was posting on Raging Bull about Bluepoint while he had a financial relationship with company insiders Michael Markow and Francois Goelo:

Armstrong recalls that at least one of the three stocks under question was bought at above the market price. ... Armstrong does not know the specific amount he gained from selling the shares of three securities in question that he purchased from "Markow and Goelo."

Markow operated Global Guarantee Corporation, a company that received 1.5 million shares in the AccessTel merger.

Bluepoint has gone out of business. The company laid off all employees in 2005 after an aborted attempt to develop Linux software for the car industry and exists today as an empty shell hoping for a merger. "As of December 31, 2005, the only asset the Company owned was cash of US$514," its annual report states.

Shares of AccessTel are worth seven-tenths of a cent now, down from around $1.25 at the time of the merger. The New Jersey company has left the wireless business and sells ladies pantyhose manufactured in Lebanon.

In an October 1, 2000, posting on InvestorsHub, Armstrong said that SEC enforcement of messages on an over-the-counter message board was extremely unlikely:

The only thing anyone ever gets nailed for in the OTC is deliberately and misleadingly pumping to dump, anything other than that is just too ordinary for the SEC to bother.

-- Rogers Cadenhead

Comments

Was Armstrong ever investigated for touting AccessTel?


 

Good reporting. I've been blogging on this, and well as on the bizarre Jerome Armstrong Astrologist deal too.

I've also been burrowing around the various public PAC filings to see who got and gave what from whom. It's getting interesting.


 

God you're a journalism stud. The more I think about it, it wasn't the fact that as a conservative I'd be continually fighting for my life that drove me out of journalism, it was you and Mary showing me how it's done and realizing I wasn't doing that, and probably couldn't. Oh and the pay scale.

I have unmarried sisters, is your seed available for purchase?


 

Shares of AccessTel are worth seven-tenths of a cent now, down from around $1.25 at the time of the merger.

I would refer you to page 54 of the SEC filing you cite, which states that

"The Company has the following obligations represented by demand notes payable Global Guarantee Corporation. Global Guarantee has agreed to accept common shares as payment for the demand notes. The conversion price is $.25 per share. "

of course, two people who were owed three months salary agreed to settle for half of what they owed through transfer of common stock -- with the value of each stock pegged at $2.00(page 53).

***********

re: Armstrong/Bluepoint, if he could have afforded a good lawyer, he probably could have gotten a much better deal. But 39 year old grad students with a baby can't take on the SEC. The charges against Armstong appear to have been motivated by a desire to compel his testimony against the real scammers, and not being able to afford adequate representation, Armstrong was forced to take whatever the SEC offered.

The SEC filing provides no evidence of a quid pro quo -- the case is purely circumstantial. The SEC filing certainly does not allege that Armstrong was in any way aware that he was involved with scammers -- and it looks to me like Armstrong was just another victim of the scam. Armstrong was stupid -- he appears to have been taken in by some con men.

Of course, the SEC made it impossible for Armstrong to defend himself today, allowing people to couldn't care less about Armstrong's involvement in Bluepoint the opportunity to attack him without rebuttal. Why don't you focus on the financial dealings of Cheney and his relationship with Halliburton, rather than picking on Armstrong?


 

In an October 1, 2000, posting on InvestorsHub, Armstrong said that SEC enforcement of messages on an over-the-counter message board was extremely unlikely:

this is a blatant mischaraterization of what Armstrong wrote. The discussion was about "insider trading"; Armstrong was arguing that the SEC did not go after people who did not knowingly promote scam stocks.

And, in 2000, they probably didn't. Armstrong was probably named to compel his testimony in the much larger and more significant defendents in the case. The alternative, of course, is even more sinister -- the Bush administration may have targetted Armstrong because of his political activities....


 

There's not much I can offer on the Bluepoint situation beyond the SEC suit, Armstrong's response and the settlement.

But we can see from the AccessTel deal that Armstrong was issued 25,000 shares of that stock at the time of the merger, and the 95 postings show him promoting the stock without disclosing this interest.

Where's the point at which Armstrong was conned? The only patsies I see are the people on InvestorsHub who were researching AccessTel without knowing he was part of that merger deal.


 

"But we can see from the AccessTel deal that Armstrong was issued 25,000 shares of that stock at the time of the merger, and the 95 postings show him promoting the stock without disclosing this interest."

gee, I guess the fact that Jerome wrote that he bought and sold shares in AccessTel doesn't count as "disclosure".... nor that Jerome's interest in AccessTel were part of a public SEC filing....

and from checking the website, I notice that there are few people who reveal the precise nature of their holdings in the stocks that they suggest may be good investments....


 

"Why don't you focus on the financial dealings of Cheney and his relationship with Halliburton, rather than picking on Armstrong?"

Doesn't that pretty much sum up the pro-Kos side of things? All they've got are non-sequiters to throw at their critics.


 

I guess the fact that Jerome wrote that he bought and sold shares in AccessTel doesn't count as "disclosure".... nor that Jerome's interest in AccessTel were part of a public SEC filing.

You guess correctly.

Telling people he was getting thousands of shares in the merger agreement counts as disclosure.

Telling people he was involved in the merger counts as disclosure.

Telling people he had purchased (or been issued) five stocks directly from one of AccessTel's principals counts as disclosure.

I couldn't find any of these, but I did find lots of messages where he sounds like an objective investor reading the tea leaves and predicting great things for the stock.


 

I guess this....

www.siliconinvestor.com

which was posted when AccessTel's symbol was ATEL doesn't count as 'disclosure'?

Should Jerome have reposted it, just to keep you happy?

The problem here is that you claim it wasn't disclosed -- but it was part of the public filing, and appeared on the investorhub website.

More importantly, you have no idea why Jerome was on that list --- but you are doing your best to imply that it was because of his touting of the stock. That's a smear, pure and simple.


 

The message you linked to was posted by Floyd Schneider, a gadfly who exposes penny-stock scams. He said in the New York Post that Armstrong was "among the nastiest and ugliest stock touts from that era" and posted on Silicon Investor recently that Armstrong used multiple usernames -- including Jerome Jackson, 426Figures, MyDDDOTCOM -- on these boards.

I've already found at least one example where two of those usernames, myDDdotcom and 426figures, are recommending the same stock on ClearStation.

How does Schneider's post constitute disclosure by Armstrong?


 

how does Schneider's unsupported accusation constitute evidence?


 

At this point, it just seems like you're throwing out flak rather than making a legitimate inquiry into the situation.

You can keep attacking me for looking critically into this, as Daily Kos contributor Armando has been doing to another blogger on Ezra Klein's site, but that just seems like an implicit acknowledgement there's no real defense for his actions.


 


 

At this point, it just seems like you're throwing out flak rather than making a legitimate inquiry into the situation.

all you are doing is throwing out random facts without any proof that Armstrong did anything illegal. You accuse him of illegal stock touting solely because his name appears on a list of people who were given stock as a result of the Accesstel "reverse merger" -- but you provide no evidence of him doing so.

"legitimate inquiry" includes considering both sides of a story -- you ignore Armstrong's side, and the fact that under the terms of his plea bargain he can't defend himself.

Did you blow up frogs as a child?


 

what has destroyed Armstrong politically is not the SEC settlement but all the astrological wacko stuff that is now spreading over the web even though MyDD are trying to expunge their own record.