Stock Adviser Faces Suit |for Fracking Promotion

     (CN) — A “stock prospector” must face the Security and Exchange Commission’s claims that he touted fracking in the North Dakota region for a shady penny stock firm, a federal judge ruled.
     To fund a $4.1 million campaign promoting Texas-based Norstra Energy Inc.’s stock in 2013, a British Virgin Islands-based firm agreed to pay Full Service Media’s owner William Kaitz $700,000 to hire staff and send promotions to potential investors, according to the SEC.
     Kaitz, in turn, hired Eric Dany, the editor of two newsletters: the “Stock Prospector” and the “Mutual Fund Prospector,” to back the campaign using his brand and image, the commission says.
     Full Service Media paid Dany $20,000 for an email and snail mail campaign using his headshot, and over $5,100 for renting some of his subscribers’ addresses, the SEC claims.
     “I’m predicting that NORX could be my best ever call!” Dany says in the letters.
     “I believe the company’s estimated 8.5 billion barrels of oil in place could easily fetch $25 a share in a takeover!” Dany continues.
     Dany invites investors to “act now” to “turn $5,000 into $60 million as Norstra drills wells on its overlooked and ‘underpriced’ Bakken Resource!” claiming the shale formation — located in parts of Montana, North Dakota, and Canada — could yield 8.5 billion barrels of oil. (Italics in the court documents.)
     The promotions proclaim a 99.6 chance of success at duplicating “the explosive 5,557 percent profits of Kodiak Oil & Gas!”
     A $10,000 investment “would explode” into a half million dollars!” the promotion states.
     The fine print states that the materials were paid advertisements, however, and advises readers to “independently verify” any and all details, according to the SEC.
     The SEC nonetheless suspended trading in Norstra in June 2013, due to questions concerning the adequacy and accuracy of Norstra’s press releases.
     The agency filed suit in Manhattan Federal Court two years later, alleging that Norstra, Dany, and now-dismissed CEO Glen Landry made material misstatements regarding the firm.
     Dany moved for summary judgment, claiming he did not “make” the statements.
     U.S. District Judge William Pauley III denied the motion Wednesday.
     “The promotions open with a headshot of Dany; they are entitled ‘Eric Dany’s Stock Prospector;’ and they are written as if Dany is speaking to the reader, including such phrases as: ‘My name is Eric Dany’; ‘I’m the editor and publisher,'” Pauley wrote.
     The judge further noted the numerous “I” statements Dany makes in the promotions.
     “The direct-mail promotions also bear a bolded image of Dany’s signature,” Pauley wrote. “Dany’s contracts buttress the fact that he elected to participate in the campaign. And Dany has not submitted evidence suggesting that he did not want the statements in the promotions to be attributed to him. The Supreme Court has deemed such attribution to be “strong evidence” indicating that Dany ‘made’ the alleged misstatements.”
     Kaitz gave Dany the authority to manage the content of the materials, the ruling states.
     “Dany protests that he penned but a small portion of the text in the promotional materials, and was largely making minor content edits,” Pauley wrote. “But such evidence would, at most, create a factual dispute to be resolved by a jury. And Dany’s additional objection that the promotions included a disclaimer does not alter the identity of the party making the ‘disclaimed’ statements.”
     Finding no question whether the promotions were sent out by email and snail mail, Pauley granted the SEC’s motion for partial summary judgment regarding interstate commerce.
     SEC spokesman Ryan White declined to comment on the ruling.
     Dany’s attorneys with Kopecky Schumacher Bleakley Rosenburgin Chicago and the Law Office of Marisa Rauchway Sverdlov in Short Hills, N.J. did not return requests for comment Thursday.

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