CLOAK-BUSTING RULING IN SCAM LAND: Court Records Show SEC Served Subpoena On Google Aimed At Unmasking Identity Of Possible Touter In ‘Pump And Dump’ Probe Into Price Of Jammin Java Corp. Stock; ‘John Doe’ Moved To Quash, But Judge Says No
A judge yesterday upheld the SEC’s ability to investigate potential fraud schemes by issuing administrative subpoenas to vendors whose services potentially are being used to help scammers cloak themselves while they harvest illegal profits. The ruling is apt to cause great unease in the corners of the Internet occupied by murky HYIP, autosurf and pump-and-dump hucksters because it reinforces the principle that anonymous fraudsters cannot shield themselves from prosecution by citing their First Amendment right to free speech while they’re picking the pockets of their marks.
The case speaks to the issues about whether federal agencies that suspect wrongdoing can turn to third parties — in this case, Google — to determine the identities of anonymous posters on the Internet and whether the posters can quash subpoenas by arguing that disclosure of their personal information is a violation of their right to anonymous free speech under the First Amendment.
In the case, the SEC said it had reason to believe that an anonymous poster using a Google gmail address was participating as a touter in a pump-and-dump scheme designed to harvest illicit profits by driving up the price of Jammin Java Corp. stock.
The SEC issued a subpoena to Google under the Electronic Communications Privacy Act (ECPA), which requires “a provider of electronic communication service or remote computing device” to “disclose to a governmental entity the (A) name; (B) address; (C) local and long distance telephone connection records, or records of session times and durations; (D) length of service . . . and types of service utilized; (E) telephone or instrument number or other subscriber number or identity . . .; and (F) means and source of payment for such service, of a subscriber when the governmental entity uses an administrative subpoena authorized by Federal or State statute. . . .”
Google notified the gmail user that it had been served with a subpoena. The user, in turn, hired counsel to quash the subpoena and block his identity from being disclosed to the SEC. The user identified himself as “John Doe” in the filings. A judge yesterday sided with the SEC, ruling that the subpoena “is explicitly permitted by the ECPA, and does not implicate First Amendment concerns.”
In outlining the ruling, U.S. Magistrate Judge Nandor J. Vadas of the Northern District of California said that “Congress granted the SEC the authority to investigate potential violations of securities laws. In issuing the SEC Order and proceeding to investigate the Jammin Java stock fluctuations, the SEC is fulfilling its Congressional mandate.”
In addition, Vadas ruled that the SEC “has followed the procedural requirements for serving an administrative subpoena.” Meanwhile, he ruled that an argument John Doe made that “the SEC has not sufficiently established the relevance of his email address to the investigation” failed because the agency made a showing under penalty of perjury that it “has obtained information indicating that the email address `[deleted]@gmail.com’ potentially belongs to a touter in the `pump and dump’ scheme.”
“In addition,” the judge ruled, “during the hearing, counsel for the SEC testified that the SEC had investigated web-sites where the touts had appeared and tracked the email addresses of individuals who had participated in setting up those web-sites.”
John Doe’s gmail address “was involved in setting up the web-sites and/or setting up email blasts that contained touts for Jammin Java,” according to court filings.
John Doe “contends he has used the email address at issue to participate in anonymous political speech,” Vadas said in the ruling. “[John Doe] has a First Amendment right to participate in anonymous speech, political or otherwise, in online fora. However, at least in the context of valid government investigations, courts repeatedly have concluded that identifying information is not subject to First Amendment (or Fourth Amendment) protection.”
For its part, Jammin Java has acknowledged that an SEC probe into its stock price is under way, but expressly denied the firm played any role in a manipulation scheme.
“In May 2011, Jammin became aware that unauthorized internet stock promoters were promoting short term investments in the company’s stock in ‘stock reports’ and on their websites. As stated in Jammin’s May 6, 2011 Form 8-K, Jammin has no knowledge of, or affiliation with, these stock promoters,” the company said. “As a result, neither Jammin, nor anyone affiliated with the company, authorized, paid for or approved any stock report, advertisement or promotion of the company’s stock. Any information regarding Jammin that is authorized by the company and approved for public distribution will be issued by Jammin itself through periodic filings with the SEC and/or through an authorized press release.”
Jammin Java said it was cooperating with the SEC.
“We have fully cooperated with the SEC investigation and hope to see any wrongdoers identified and prosecuted to the fullest extent of the law,” Jammin Java Chairman Rohan Marley said last month.