WIGC Settles with FTC

14 November 2000
The Federal Trade Commission (FTC) and the operators of World Interactive Gaming Corp. (WIGC) have reached a settlement regarding charges that the company used deceptive claims when selling shares in the company.

The charges are in addition to those brought against the company by New York Attorney General Eliot Spitzer in 1998, which resulted in the state supreme court ordering WIGC to pay $1.8 million in restitution to defrauded investors, plus a further $4.5 million in penalties. (See "WIGC Gets Smacked Again.")

The proposed settlement of the FTC charges against WIGC, pending approval from the United States District Court for the Eastern District of New York, will bar deceptive claims in the future and require more than $500,000 to be returned to investors. The defendants, principals Jeffrey Burton and Lawrence Blocker, who did business under the name James Lawrence and Associates, are also required to post a $2 million bond prior to engaging in, or assisting others engaging in, the promotion, advertising, marketing or sale of an investment in any company that owns or intends to own an online gaming entity.

The case was part of a "Project Risky Business" sweep, performed by the FTC in August 1998, that scoured the Internet for companies or individuals promoting deceptive entertainment and media-related investments. According the FTC, WIGC officials allegedly used high-pressure telephone sales pitches and false claims to lure investors into purchasing units of 2,000 shares of the company's stock at $10,000 a pop. "In their sales pitches, the defendants combined the popular appeal of the Internet and blatant false claims about the profitability of the casino industry generally and the Internet gaming industry specifically to induce the investment," the FTC said in a press release.

WIGC officials reportedly told potential investors falsely that Wall Street brokers had evaluated the company's stock, that the stock would easily fetch $40 per share at an initial public offering in the company's first year of operation and that there were no laws prohibiting Internet gaming. As part of the sales pitch, investors were also told that the casino would earn $100 million during its first year of operation. Investors could expect to earn more than $150,000 in a year, a 1,470 percent return on their initial $10,000 investment, the FTC added. Consumers invested approximately $1.98 million in the venture.

In addition to the $550,000 consumer redress and the $2 million bond requirements, the FTC hopes to get court approval for a requirement barring Burton and Blocker from misrepresenting the nature and quality, likely return, associated risk or any other material facts regarding any investment. The settlement bars the use of aliases and bars the defendants from selling, renting or disclosing their customer list. The proposed order imposes a judgement of $1.8 million suspending payment of all but $813,049 frozen by the court in conditional settlement of the judgement, based on financial declarations by the defendants. Of the $813,049, $550,000 will be available for consumer redress. Should the court find that the defendants misrepresented their financial situations, the entire $1.8 million becomes due.

Additionally, a separate proposed default judgement against another defendant, Gregory Flemming, similarly enjoins him, imposing a $1.8 million judgement and requiring a $2 million bond before marketing any investments.