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Exotics.com Alleges Stock Fraud in $100M Suit

Exotics.com Alleges Stock Fraud in $100M Suit
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Aug 17, 2004 10:42 AM PDT    Text size: 
LOS ANGELES — Exotics.com has filed a suit asking for $100 million in damages against a number of licensee affiliates, an investment bank, 200 John Doe partners and others over an alleged stock manipulation scheme.

Playa Del Rey, Calif.-based Exotics.com is an online adult classified ad service that features escorts and modeling in Los Angeles, New York, Boston, Toronto, Seattle, Philadelphia and Washington, D.C., as well as other metropolitan areas.

The suit, filed in Los Angeles Superior Court, claims that investment banker Ladenburg Thalmann & Co. of New York conspired in a nationwide stock manipulation scheme called “death spiral” financing.

"Ladenburg — one of the oldest investment banks in the world — is also a defendant in several cases in New York and other jurisdictions brought by small- to mid-size public companies which have allegedly been destroyed by this same scheme," attorney Wes Christian, who represents Exotics.com, told XBiz.

The complaint alleges a five- or six-month period where Exotics.com's stock price was manipulated downward by “naked short selling” by broker dealers named as defendants.

The suit claims the broker dealers intentionally inflated the stock price and later traded amongst themselves through “wash trades.” Once the stock was sufficiently depressed, the suit says, the defendants funneled huge profits to offshore accounts.

One of the defendants named in the suit and identified as a broker dealer is Scott London, who is an owner of NY-Exotics, a licensee of Exotics.com. London is also linked to Red Rock LLC, a company that was formed to be a “funder,” or an avenue to create a façade of legitimacy, the suit claims.

The 11-count suit charges the defendants with conversion, conspiracy, breach of contract, fraud and unfair competition, among other accusations. It seeks punitive damages and declaratory and injunctive relief, as well as attorneys fees.

"We want to make sure that the parties found responsible are punished for the harm they caused our company and shareholders, and are prevented from doing the same to others," Exotics.com CEO Ingo Mueller said.

Calls to Ladenburg Thalmann weren’t returned Tuesday to XBiz.

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