Pump ’em, Then Dump ’em: A Current Cautionary Tale

by theblindsquirrel | March 26, 2014 12:50 pm

The Blind Squirrel Diaries

“What tangled webs we mortals weave when first we practice to deceive” – Shakespeare

“There’s a sucker born every minute” – P.T. Barnum

I know its been only a few days since my March article ran on these cyber-pages, but there is an issue currently unfolding in the market that simply may not wait until the middle of next month to be disclosed and discussed. I’m talking about a situation that is, in my opinion, a classic “Pump and Dump” scheme being run by one of the best “Pumpers” I’ve ever encountered and a very small and new company that wants to see its stock price soar.

I’m going to tell you all about it in a few minutes in hopes that you haven’t already gotten caught up in this subterfuge, placed money at high risk, and stand to possibly lose most if not all of it in one brief moment. And that moment, if it comes, could be at any time now.

Before I get into that I need to set the stage and tell you how and why I am aware of this. As much as I hate to admit to it, that knowledge comes from a recent personal experience that I ought have known better than to get involved in. But those twin terrors, Fear and her sister Greed, overcame logic and common sense. And it cost me. Not so much as to change my life – I never, ever put more money into any position that would cause me unrepairable harm if it were all lost. I knew what I was into shortly after taking a position and yet chose to ride it. I was making money, and very fast. Greed took over the helm of that little ship and drove it straight into the rocks.

And also remember this: I have previously disclosed that I maintain a little “Vegas” account in which I trade micro-cap and penny stocks for quick in and outs, hopefully to make a profit of whatever size. This isn’t investing – it’s gambling[1] and I know it. The payoff to me is twofold. It allows me to satisfy that inner drive of mine to take big risks in hope of big reward. And the money I make – if and when I make it – is used to acquire the “toys” I want like a new laptop or sound bar for my HDTV or whatever. You get the idea. This lets me enjoy the fruits of my labors in the here and now. Assuming there is any fruit to be had, of course. I DO NOT recommend anyone do this because the risk is quite high and you will lose as often as you prosper. Hence the nickname of the account: The Vegas Account.

I think that’s all the disclosure and warnings I need to make. Let’s get the show started

The two players in this were a website called “Analysts Corner”, the “Pumper” for the company, and the company is Nutranomics, symbol NNRX. Remember the name of the Pumper here – Analysts Corner – we’ll see it again in a minute.

Here’s a somewhat condensed version of the events that unfolded.

On or about the 5th of November, 2013, I found an e-mail in my inbox from a company called “Analysts Corner” (hereinafter referred to as “A/C”). It was a short, 2 page summary of a company by the name of Nutranomics (NNRX) and had the appearance of being some sort of research report. This issue, coded as “Q4 2013, Issue #5.08”, was entitled “Health Without Pills.” It was obviously an announcement that the publisher felt was of real significance for NNRX, one likely to “put NNRX in the spotlight.” It went on to describe how NNRX had secured exclusive North American sales and distribution rights to the Nutriband delivery system, a health supplement transdermal patch. This system, when loaded with whatever health supplements[2] you wanted, would eliminate the need to take those huge supplement pills we all know and hate.

NNRX “is designing these transdermal patches to improve sleep[3], manage pain, boost energy, and control weight. It’s health without pills direct to the bloodstream.”

OK – it goes on and on about the potential this holds for NRX and investors who see the significance of this development and want to cash in on it before the mainstream finds out. Typical hype and hope stuff. The stock price had closed the day before at $0.682 and was challenging the resistance levels of $0.65 – $0.70 Expectations were that the price would break out of this resistance the next morning and from there, well, nothing could stop it to $1.00.

They closed the letter by saying…

“NNRX could soon reach new all time highs (above $1.48). Remember, this is our expertise. We identify these early situations on the verge of massive success and provide triple-digit gains for our subscribers again and again. NNRX looks to be no exception. If momentum continues this pace, NNRX will soon join the ranks of our most successful picks to date.”

There was more, some with even bigger expectations and claims. I was intrigued, so I took a cursory look at the company for myself and found that, yes, the price had been on a tear to the upside as of late. There was little to no info on the company itself, its management or history. But it fit the mold of a company that I like to dabble with in that Vegas account. And having just closed out another position which left me with some uninvested cash, I was primed and ready for action.

If only I had read just a little further into that report …

At the very bottom of it, in pale print, was a little section that said “Please read our disclaimer and disclosure.” I didn’t do that. I mean, c’mon – aren’t all those disclaimers and disclosures just pretty much the same ole same ol’ boilerplate written by lawyers to get the publication and its people off the hook of liability for anything they say or do? Why waste time reading just another of the same? So I took a pass on it.

Big mistake.

The following AM I watched at the open for that predicted breakout above resistance – it didn’t happen, but so what? The price struggled and I took the leap and put on a starting position at $0.6025. The gambler instinct in me that rides on my right shoulder and whispers to me “go ahead, take the chance!” had carried the day over the common sense guy that sits on the other shoulder and whispers “don’t do it, man .. don’t do it!” The game was on.

As I held this position and watched the price action, the good people at A/C kept up the barrage of mailings with such reassuring and promising reports. On or about November 20 I got another mailing from A/C, edition Q4 2013 Issue #5.19. In it they fanned the flames rather extensively. After identifying what they think are the three key factors in a stock price moving higher (price uptrend, catalyst to movement, and potential price target) they said the following:

“Today was a textbook higher low day and as you can see from the chart below, this action was healthy, helping to move the price back into the uptrend clearly pointing toward $1.75 by January 27, 2014.”

OK, sez I to myself, we’re now at $0.70 and they are projecting $1.75 in two months. Nice if you can get it. What else is going on that could make this reality?

I then read under the “catalyst” paragraph that…

“This is one factor NNRX has in abundance with the multiple developments on the horizon; including the GenEpic acquisition currently underway, Glucozyme product launch early December and upcoming human clinical trial results due within the next few weeks. Fulfillment of these developments will be major catalysts for NNRX’s stock price, helping push it toward $1.75 and beyond.”

Made some sense to me. All those catalysts working together in such short order is indeed one thing that often pushes prices higher, sharply and fast. If they all happen, that is.

Finally, under the “Potential” category they stated…

“The recently issued research report with a $3.75 target price translates into over 360% upside from todays close.”

I had seen enough. This NNRX, whoever or whatever it might be, seemed to have everything I look for to get into my Vegas account. The way the reports were worded made it seem that this “Analysts Corner” firm was a research firm of one sort or another. And the potential returns they were projecting, well, Sister Greed was licking her chops at the idea and Sister Fear was urging her on with ideas of missing out on this opportunity. I was hooked.

On November 22 I had a small profit and, for reasons I have forgotten, decided to cash out half the position. I sold at $0.7812 p/s, netting a gain of 27.5% in ~10 days. Not too shabby and I still had half the position in case of further gain.

That was when I noticed those disclosure and disclaimer once again and, having some idle time at that moment, decided to have a peek. Fortunately I wasn’t eating when I started reading or I might well have choked to death. First I looked at the disclaimer part. To give some credit where it is due, A/C has one of the easiest to read, most understandable and complete disclaimers I’ve ever seen. They disclaim EVERYTHING it is humanly possible to disclaim as far as accuracy, responsibility, and bias is concerned. Basically they tell you that they are not a research firm, are PAID by third parties to write and send these reports out, make no assurance that any statements they make are true, and generally protect themselves from any and all possible complaints by investors that act based on what they read from them. But one must pretty well expect this sort of thing in these cases. People love to sue other people when things go wrong, so protecting oneself fro that possibility is job one.Nature of the beast, so to speak.

But it wasn’t the disclaimer that was of primary concern. It was the disclosure.

In the disclosure they listed about a dozen payments they had received over the past few months from an entity called “Nugget Enterprises LLC.” Who and what they are and what interest they have in NNRX was not discussed. But those payments? These payments averaged about $100,000 per payments with a total of ~$1.2 MILLION dollars as of the time I was checking. I could find no records of Nugget Enterprises LLC, nor make any connection between them and NNRX. All I cold believe with certainty was that whoever / whatever they were, they had a huge interest in seeing the price of NNRX rise. That bit of info sealed the deal in my mind that, yes, this was a true “pump and dump[4]” deal with Analysts Corner being the pump side and the dump would probably come from Nugget Enterprises when they were ready. That’s just my opinion, of course. I could find no connection to make that theory fact.

Even so, I had made money and the remaining position continued to climb. On December 3rd I doubled down at $1.03. A/C kept sending update reports and by now had a price target of $4.85 within 12 months. That was all well and good until I noticed in one of the reports, Q4 2013, Issue #5.26, they had dropped into the copy a new little paragraph. It was entitled “Pay Yourself First – as the trend unfolds, lock in profits” This was new. Nothing before had ever hinted at cashing out any part of a position – just buy more was the main message. While the message of this new inclusion was indeed a time-proven and smart thing to do, it was a little disconcerting to me. Why suggest any sales if the future looks so very bright? Things that make you go “Hmmmmm…”

Things continued to go well over the next few days, price rising in small fits and starts to ~$1.25. At that point I had an average cost basis of $0.82, a gain of 52.4% in a month. I decided that, with all I had learned about NNRX, Analysts Corner, and the addition to the mix of this “Nugget Enterprises LLC” I would be well advised not to look this gift horse in the mouth any longer. On or abut December 7th I decided I would sell everything when the price crossed $1.30 bid. It was at $1.27 at the time and I figured squeezing that last $0.03 out of it was absolutely possible so why not wait and get the last of it?

Ah, Sister Greed – you can be so alluring and persuasive.

And then the shoe dropped.

On the morning of December 9th I watched the stock open at $1.25, then bump up to ~$1.28. Just $0.02 away from my goal of $1.30 that would see me entering the sell order. I’d have a profit of some 56% or so and be one very happy camper. Figuring I’d give it a little time to hit that mark, I turned away from the computer screens and made a couple phone calls. When I went back into the office around 10:30 AM and refreshed the screens I felt like I had just been hammered by a NFL linebacker from the blind side. At about 10:10 AM, an order to sell some 1.5 million shares had been dropped and the price absolutely, totally, completely cratered. The current bid was at $0.58, down from the $1.27 I had just been looking at. The “dump” was on! And I was still long, trying for that last $0.02. Sister Greed was laughing at me, and Sister Fear had now turned from an attitude of missing out on a big gain to one of being in a situation where all could be lost. I had gone from a gain of ~56% to a loss of ~30% in one quick moment. That will take your breath away.

But hope springs eternal, and when hope is all you have to go on, you may do some silly things. I watched as the price stabilized a bit and a small recovery began. The bounce that refreshes was underway! I hoped. Realizing that this was either a prelude to total disaster or an opportunity to average down in what could still be a profitable deal, I chose the latter path. I bought half-again of the holdings I had at $0.6595. That brought my cost basis down to ~$0.76 or so. A recovery to that level was possible, or so I told myself.

But it was not to be. Even though Analysts Corner put out another update trying to put a happy face on these events – with no explanation as to why it happened. The rout was on and I was right smack dab in the middle of it. On December 12th, with the price slowly sliding down, I closed out the position at $0.4065. Soup to nuts, I lost about 40% overall. Such is the life of a gambler.

As for how has this played out since, well, I never heard another word from Analysts Corner about NNRX. An article published on Seeking Alpha[5] trashed the resume claims of the CEO of NNRX. And yesterday (March 25, 2014), NNRX closed at $0.11. At least my last decision proved to be a good one. And I moved on.

So there is part one of this story, the story of how a real pump and dump scheme works and the dangers of getting involved. For those of you who are newer to the investment arena and might be lured by things of this sort, all I can say is BEWARE and be ready to lose everything you put in. Be SURE you can sustain the loss if and when it hits. And when it hits it will come like a tornado with you totally unprepared and unaware.

Now on to Part Two…

THIS IS THE CRUX OF THIS POSTING – A WARNING FOR ALL READERS

You now know the complete, detailed story of my little venture with NNRX, Analysts Corner, and other third parties whom I know little to nothing about. That was the cautionary tale that needed to be told so you can see that I am not just making this up and drawing conclusion with no basis in fact or experience. I’d remind you that I entered the NNRX position with eyes wide open, knowing what I was getting involved in (well, mostly at least), and take responsibility for those actions. This was done with money I could afford to lose if necessary. I was not acting out of ignorance or stupidity or any other sort of flawed reasoning. I would NEVER suggest anyone try to follow suit and get into this sort of situation. I believe in personal responsibility for ones own decisions and take full responsibility for what happened with my position in NNRX.

With that behind us, I want to make you aware of another similar event that is currently unfolding and give you the info you may need to avoid it. It starts with that “Research” firm, Analysts Corner.

After the dust settled on the NNRX debacle, and seeing that all communication from A/C had stopped re NNRX, I hit the unsubscribe button on their home page. I figured that was the last I’d hear from them. But not so fast, Buster. Apparently they don’t let go that easily.

Before I elaborate, for those of you who may be tired of reading, I’ll jump right to the conclusions in summary form. Those conclusions are:

• Be aware that any communications / recommendation coming from Analysts Corner, or any other affiliated source, is NOT to be seen as RESEARCH. They are paid to send out these messages by either the company under consideration or some other third party, motive unknown.
• The information presented by Analysts Corner is very carefully polished, given the proper spin, and designed to make the immediate future of the price moves appear near certain – regardless of their disclaimer telling us that they really have no idea of or responsibility for what will unfold.
• Any information and/or projections made in the reports from Analysts Corner need to be seen not as true, unbiased research but instead as conclusions they make which will give investors the idea that the company is poised on the brink of a major price breakout.
• The current company they are promoting, Rightscorp, Inc., is a very new company that came into being by way of a reverse merger with another company that had been listed on the OTCBB called Rightscorp of Delaware. This reverse merger enabled the new company to have a publicly traded platform from which to began to sell shares with little to no history of operations, revenues, or any meaningful track record. Prior to this merger, RIHT was operating as an entirely different kind of entity in an entirely different field, and with little success.
• With those factors in in mind, and with the recent events surrounding NNRX as detailed in the first section of this message, an investor who gets involved here is – in my opinion – taking on a huge risk of capital if this situation unfolds as did the one with NNRX.
• FINAL CONCLUSION: Stay away from RIHT and any other promoted stock by Analysts Corner. If ever there was a huge “BUYER BEWARE” situation, this could be it.

NOTE: These conclusions are those of myself alone and are just that – opinion based on recent events and the facts that can be uncovered. This IS NOT a claim that Analysts Corner or any affiliate is breaking any securities laws or is intentionally and with malice trying to defraud investors. They fully disclose what they are, what they do, and the fact that they are being paid to do it. Each individual investor needs to do some due diligence of their own and arrive at their own conclusions as to what game is afoot here. Then proceed according to those conclusions.

Now lets put some meat on these bones for those interested in knowing more.

Last Thursday, March 25, I saw an e-mail from Analysts Corner in my spam inbox. Curious to see if they were back on the NNRX trail, I opened it. And I found that, no, NNRX was not mentioned. Instead they had a new company, Rightscorp, Inc. (RIHT) to talk about. The report format was the same as I found with NNRX. Similar paragraph headings, similar projections and claims for this to be the next big winner. In other words, same S***, different day. But I just had to look. No harm in looking, is there?

The FIRST thing I looked at this time were those two items I had passed over with NNRX – the disclaimers and disclosures sections. The disclaimers were essentially the same – straightforward, clear, and totally scary in some parts when you realize what they are telling you is that they have no responsibility at all in making sure the things they say are true or accurate, they are being paid to say all of it, and that you cannot rely on one single word in making a decision to invest or not. Very slick. Very clever. Ironclad.

But the disclosure section, while the same idea, had different information. It showed that Analysts Corner was being paid by a company called Priority Partners, Ltd. this time. And again, no info on who that is or why they are willing to pay this stipend to them. On March 10, 2014, Priority Partners paid Analysts Corner $500,000 for the work to date. A cool half-mil in one payment! Something seems rotten in Denmark. Again.

So I took a closer look at this new company being promoted, Rightscorp, Inc (RIHT – OTCBB). Here’s what I was able to ferret out.

As mentioned above, RIHT in its present form came into being just a few months back when a reverse merger of the company in its then-configuration was completed with Rightscorp of Delaware. This made them a publicly traded company right away without need of all the filings and such that normally accompany a new listing on any exchange.

The business that RIHT is into is something that is directly tied to the entertainment industry, specifically the area of copyright infringement. The company has already developed relationships with a few major players in this business such as Warner Brothers. What RIHT does is send out leters to people who download copyrighted material telling them that they have violated the law, are subject to some serious penalties if taken to court and found guilty, but can atone for this misdeed by simply acknowledging the indescretion and paying Rightscorp $20.00 to settle the matter. That $20 may seem insignifignt, but there are thousands of instances every day where this occurs, usually done by some unwitting teen just trying to download a new hit tune or watch a movie. Getting that official notification from RIHT will certainly scare the bejesus out of most teens. It would me as well. So, in most cases, the money is paid and life goes on – with strict admonition from parents to the son or daughter that did this to stop immediately.

This approach to stopping this problem – which is pandemic within the industry – has taken root and is now being widely used. It would seem that RIHT is sitting perfectly positioned to take that ball and run with it. And truly, maybe they are. Maybe.

The insiders, executives, and major investors at RIHT are some very familiar names to people in the entertainment business. Analysts Corner makes much ado showing these names and giving briefs on them. For example, we have as CEO Mr. Christopher Sabec, CEO of the Jerry Garcia estate and someone who helped launch the Dave Matthews Band among other relationships. Mr. Sabec is beneficial owner of 10,875,000 shares of RIHT as of 10/25/2013. Sitting alongside Mr. Sabec is Mr. Robert Steele who also is beneficial owner of the exact same 10,875,000 shares as of 10/25/2013. What experience/connection to the entertainment industry Mr. Steele has I don’t know. These share amounts are in excess of 10% of the float of RIHT

As advisors we have (1) Bill Zysblat – he reportedly has already invested some $200K and is the business manager for David Bowie, Sting, Rolling Stones, and U2. (2) We have Mr. Jim Caparro, former chairman and CEO of The Island Def Jam Music Group, former chairman of Warner Elektra Atlantic. Investment, if any, undisclosed. And (3) Mr. Peter Paterno, Attorney for Metallica, Dr. Dre. Investment, if any, unknown.

These bio factoids are from the Analysts Corner postings. I have not verified the truth of any of the claimed associations or positions.

At a glance you’d have to admit this is a quite impressive lineup of industry professionals which ought know what they are doing. And perhaps they do. And as for the business model, this too appears to be legitimate and gaining popularity for entertainment companies to use to try and get the infringement issues under control. And RIHT is right there with the connections and insight to become one of the biggest beneficiaries of this trend. Or so it would seem.

Looks like I just made a solid case for immediate investment here. So what’s wrong?

First, it’s the big push that is underway at Analysts Corner than concerns me. It seems to match up near-perfectly with what happened at NNRX. As is often quoted, “Fool me once, shame on you. Fool me twice, shame on me.” And that $500,000 paid to A/C by Priority Partners? Who / what is that? Who is behind it? What positions might they have in RIHT? What is their intent? Inquiring minds want to know this stuff but no answers to be found by this Blind Squirrel. I remain blind in that instance. And it makes me very nervous. Even Analysts Corner, in the disclaimers, says they don’t know who exactly it is that pays them or what they are trying to ultimately accomplish. If they don’t know, how are we supposed to?

So there are a couple concerns about RIHT and it’s future. But there is another, larger one that isn’t discussed anywhere in the Analysts Corner bulletins. The issue is the entire concept behind these “demand settlement letter” that RIHT is using to collect money from accused downloaders. There is much more to that than meets the eye.

On Friday the 21st I got another spam mail from a different source but with similar look and feel of Analysts Corner stuff. The format and wording was similar, reminded me of the way A/C operates. I remembered that, in the disclaimers, A/C had mentioned that there may be some “affiliated parties” that also may promote the same stocks. Whether or not it is affiliated I don’t know, but I suspect it is. Anyway, they were also touting RIHT and made mention of a web site they suggested I have a look at since it related to this new “demand letter” process. The implication was that I’d find confirmation of future positive results for companies involved in the business. Curious, I went there to have a look. What I found there was a posting from a law firm by the name of “Cashman Law Firm, PLLC”. It is entitled “TorrentLawyer – Exposing Copyright Trolls and Their Lawsuits.” The actual author is unnamed.

What I read was, to me, anything but encouraging. For example, he/she states ” I’ve been fighting with myself trying to determine whether to write this article for a problem with Warner Brothers’ $20 settlement letters that they are sending out to accused downloaders of their content. Yet I suspect that this is just the beginning of something larger – I fear that the MPAA might be jumping on board the “DCMA settlement letter” scheme or even worse, starting to sue defendants again en masse for copyright infringement.”

That doesn’t have the ring of a positive statement to me. They go on to express concern that while acknowledgement of this demand letter and paying the $20 fee releases the accused from liability for that one instance, it actually is a legal form of admission of guilt to any future infringements and opens the accused up for fines of some $20,000 and attorney fees. So while that kid or parents thereof think they are getting off light, if it happens again, whether by intent or accident, they will be in a whole other world of hurt. Not good – not good at all.

You can read the full post by going to https://torrentlawyer.wordpress.com/tag/rightscorp. It’s worth reading.

I think I’ve given you all enough to go on for now. Beware any mail from Analysts Corner (find them at www.analysts-corner.com ) and any stock they are promoting. Specifically, at this time, Rightscorp, Inc (RIHT).

Might RIHT be a big winner? I don’t know. Is this a pump and dump? It has all the earmarks but then again, I can’t be sure – and I’m not accusing Analysts Corner of this. These is no proof of any such thing. You read, you decide.

Wishing you all the best of investment success and excellence!

URGENT P/S: ALL READERS TAKE NOTE

I always hate being wrong. And sometimes I hate being right even more. Here we have a case of the latter of those two.

I had just sent Travis the final copy of the story about RIHT when a price alert trigger for RIHT hit my screen. The selloff – or perhaps the “dump” has begun.

While I was concluding the article, RIHT opened at $0.85, went up a penny, then the selloff started. By 11:00AM the price had declined to $0.64, down ~ 24% or so. Volume was already near double a normal full day coming in at just over 500,000 shares – and there is still lots of day left. Curious, though, is that this is entirely different from what NNRX did. The largest trade I can find is for 37,500 shares. The rest are mostly in the 2000 – 6000 range. So it’s not some massive dump as was seen with NNRX.

Perhaps the reason is the just-released 8-K filing by RIHT that gives fiscal year 2013 results. The tone of the report is positive, but the numbers may have failed to live up to expectation. Since there are no analysts to give guidance I don’t have any idea what expectations may have been. But whatever the reason, be glad you are not in this. If I get any follow up reports from Analysts Corner trying to put a positive spin on things I will report to you.

Take this for what I first described it to be: A Tale of Caution. And a lesson to learn about the pitfalls that lurk out there just waiting to take in your dollars and give back pennies. Benjamin Franklin famously said “A penny saved is a penny earned.” That being true – and it is – I think of this as me having made 25% or so today by NOT being there. I hope the same is true for you.

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