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By Lisa Bowman
Posted on ZDNet News: Dec 16, 1999 12:00:00 AM

LOS ANGELES -- Two men have been charged in federal court here with conspiracy to commit securities fraud for allegedly artificially inflating a company's stock price by posting false information about the firm in Internet bulletin boards.

The defendants -- Arash Aziz-Golshani and Hootan Melamed -- allegedly made almost $370,000 by purchasing shares of a company called NEI Web World at 13 cents a share then selling them for as much as $15 after claiming on bulletin boards that LCG Wireless Inc. planned to buy NEI Web World.

Using screen names such as flowerpwr4, betty_johnson and Green_Matter, Aziz-Golshani and Melamed allegedly posted messages saying that NEI Web World was going to be acquired in a "reverse" merger by LCG Wireless Inc. The messages, which had titles such as "Monday high flyer" and "look for Monday jump," urged investors to buy the stock.

FBI agents said the pair used computers at the UCLA Biomed Library to post messages to Yahoo! Finance and Raging Bull messaging boards. The use of public computers made it more difficult for FBI agents to trace the defendants than if they had used their personal machines.

Investigation continuing
According to an FBI affidavit, at least two other people also participated in the scheme, but they have not been arrested. An investigation into the matter is continuing.

The case is somewhat similar to the PairGain case, which is believed to be the first instance of Internet-based stock manipulation. In that case, a former employee of PairGain Technologies Inc. directed bulletin board visitors to a false Bloomberg story that said the company was a takeover target. PairGain stock soared by 31 percent before dropping back down. Gary Dale Hoke pleaded guilty to two counts of stock fraud related to that case in June.

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