In the first case of its kind, the Securities and Exchange Commission brought charges yesterday against three individuals for illegally trying to sell shares on eBay's online auction site. The people were not penalized, but the commission issued cease-and-desist orders against them.
"We wanted to get the message across to people that they should not be selling unregistered shares on [the] Internet," said Helane L. Morrison, district administrator of the SEC's San Francisco district office.
Those charged were Richard L. Davis of Duncanville, Tex.; J. R. Hoff of Hudson, Wis.; and Louis P. Sitaras of Jupiter, Fla.
According to the SEC, Davis posted an offer on eBay in May to sell a 5 percent stake in his company, Mindhunt.com, for $250,000. In his offer, Davis claimed that he had purchased a shell company and that Mindhunt.com would soon go public.
Although there were no bids for the offer, the commission found that Davis had neither incorporated Mindhunt.com nor bought a shell company. Davis did not return a phone call seeking comment.
Hoff tried to pull a similar stunt for AmeriGa.net--a company he co-owns--except that in his case several bids were received, but eBay nullified the auction on the SEC's behest. Hoff's attorney Brent Johnson told The Post that Hoff was not aware that such a sale offer was illegal. Hoff "was naive of the federal and state laws and once he was told the offer was illegal, he voluntarily withdrew the offer," Johnson said.
In the case of Sitaras, the SEC found that he was trying to sell shares restricted for sale. In May, Sitaras posted an offer to sell 2,000 shares of Metropolitan Health Networks Inc.--a health-care services company that trades on the over-the-counter bulletin board. Sitaras was restricted from selling the shares until September.
Sitaras received several bids, but decided not to accept any after the SEC contacted him. Sitaras "was surprised that there were any issues at all" regarding the offer, said Adam Marchuck, his attorney.
No charges were brought against eBay, which claims to have on sale more than 3 million items and monthly page views of 1.5 billion. According to the SEC, eBay has since banned the sale of all securities on its auction site.
EBay Inc. officials did not return phone calls seeking comment.