Former Fox Business Network contributor Tobin Smith has settled fraud charges with the Securities and Exchange Commission. Smith was terminated by Fox in 2013 for “sponsored investment research”. Basically Smith was pumping penny stocks that he, along with NBT Group (ironically as in the “Next Big Thing”), allegedly were paid to promote. That crossed the line with Fox and apparently with the SEC too, as Smith did not disclose his advocacy of “IceWEB Inc”, a data storage company, was a paid promotion. Apparently Smith and NBT were paid to email, publish articles and use other means to boost the share price. According to the SEC, the promotional material also included “false and misleading statements”. Smith allegedly had agreements on NBT’s behalf to promote IceWEB and its stock. In return he would receive $330,000 in cash and IceWEB stock. If their pumping scheme was successful NBT could earn an additional “incentive fee” of $250,000.
Understandably, Smith and NBT agreed to be barred from involvement in any future penny stock offerings and must pay disgorgement of $165,900 plus $16,893 in interest. Smith also must pay a $75,000 penalty.
Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office, commented on the settlement;
“Smith and NBT claimed IceWEB was a ‘perfect tech stock’ in order to manipulate the market and enrich themselves with illicit stock promoter fees.”
The SEC stated that Smith made outlandish statements – i.e. he could “easily make the case” for “10X Return — $200 million valuation” on IceWEB given “what has been already paid for its competitors.” Smith made these comments even while knowing IceWEB’s financial condition was not that good.
The SEC did not mention how many people lost money on the alleged scam but it is a good example of why not to trust a financial pundit just because he or she is on TV.