SEC Charges Infinium Ex-CEO in ‘Junk Fax’ Fraud

Infinium didn’t comment by our deadline, but the company said in an SEC filing Mon. that its 10-QSB report for the quarter ended March 31 will be late. Infinium said it was “compiling and disseminating the information required” for the form “as well as the completion of the required review of the company’s financial information, could not be completed without incurring undue hardship and expense.” The company said it plans to file the 10-QSB “no later than 5 days after” it had planned to.

Roberts, 36, of Longboat Key, Fla., was accused by the SEC of authorizing the fax promotion and gaining more than $400,000 by unloading his Infinium shares in the ensuing run- up in trading volume. According to the SEC’s complaint, filed in an unspecified U.S. Dist. Court in central Fla., Roberts hired a stock promoter in Nov. 2004 to send faxes to “tens of thousands of potential investors” across the U.S. The faxes “made it appear as if Infinium Labs were on the verge of launching its flagship product,” the Phantom, when “in fact, at the time of the fax campaign, Infinium Labs lacked the financial resources to overcome the significant technological and manufacturing hurdles preventing it from marketing the game system to consumers,” the SEC said.

The SEC said the faxes also included “baseless stock price targets, predicting that Infinium Labs’ stock price would rise as much as 3,000% in the coming weeks, and falsely claimed that the company was headed by a developer of the Microsoft Xbox.” Infinium tapped Kevin Bachus -- a key player in the creation of Microsoft’s Xbox -- as its pres.- COO in late 2004 but didn’t name him CEO until 2005; Bachus later left the company.

The SEC alleged that, over the 4 months of the fax campaign, Roberts “took advantage of the increased trading volume” in Infinium stock to sell about $422,500 of his personal stock holdings. It said “many of Roberts’s stock sales went unreported to the public.” The SEC also claimed Roberts “paid the promoter with 4 million shares of his own Infinium Labs stock in violation of the registration provisions of the federal securities laws.” The SEC said it sought to “enjoin Roberts from future violations of the antifraud, stock registration and ownership disclosure provisions of the federal securities laws.” It asked the court to order Roberts to “disgorge his ill-gotten gains plus prejudgment interest, impose a civil money penalty and bar him from participating in penny stock offerings and from serving as an officer or director of a publicly-traded company.”

Michael Pickens, the stock promoter hired by Roberts, was previously charged by the SEC with a role in a related scheme to manipulate the stock of Infinium and several other small-cap companies through a series of fraudulent faxes and is under criminal indictment prosecuted by Michael Garcia, U.S. attorney for the southern dist. of N.Y.

Infinium hasn’t provided a new Phantom launch date and has recently been concentrating instead on the release of a Phantom “lapboard” -- a wireless keyboard/mouse combination product designed for PC gaming. The company said it plans to ship it this year. It is the latest game hardware company to face legal woes, following the now-bankrupt Gizmondo Europe division of Tiger Telematics. Two of the latter’s former executives - Stefan Eriksson and Carl Freer - were recently arrested in Cal. for grand theft, illegal impersonation of a police officer and illegal gun possession, among other charges. In the latest twist in the case, Cal. authorities recently raided the security company that both men were linked to, according to published reports.