Former Fox News pundit Tobin Smith has agreed to pay nearly $258,000 to settle charges he made false statements in promotional materials for a penny stock company that he hyped as “the perfect tech stock.”
According to the U.S. Securities and Exchange Commission, Smith and his investment research firm NBT Group “knowingly participated in a fraudulent scheme” to cause the stock price of IceWeb to increase sufficiently so the data storage company would receive $2 million from stock purchases by warrant holders.
The SEC said in a civil complaint that e-mails, online blogs, articles, and other communications generated by Smith contained false statements and that he failed to fully disclose he had agreed to tout IceWEB and its stock in exchange for $330,000 in cash and stock.
The promotional campaign kicked off in May 2012 with a report posted on NBT’s website that was entitled, “By Dumb LUCK I Just Discovered the PERFECT Tech Stock . . . In My Backyard!”
“Smith and NBT claimed IceWEB was a ‘perfect tech stock’ in order to manipulate the market and enrich themselves with illicit stock promoter fees,” Michele Wein Layne, director of the SEC’s Los Angeles regional office, said in a news release.
As part of the settlement, Smith and NBT agreed to pay $165,900 in disgorgement of improper payments plus $16,8893 in interest, and Smith agreed to pay a $75,000 civil penalty.
Smith contributed to Fox News Channel and Fox Business Network for 13 years before he was fired in June 2013 over the promotion of another stock. Fox had a policy barring contributors from accepting payment for research or to hype stocks.
According to the SEC, Smith’s agreements provided for incentive fees of more than $250,000 if the marketing campaigns succeeded in increasing IceWeb’s share price. The company had $2 million in outstanding $0.17 warrants that could be converted by the warrant holders to IWEB shares once the stock price increased to about $0.20 per share.
“We inaccurately disclosed some of the variable compensation to which we could have been entitled, and should have disclosed it more accurately,” Smith told Reuters.