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Securities and Exchange Commission Allowed to Probe 'Stock Generation' Site

"`We're very disappointed at the court's decision;...the court of appeals has given the SEC the green light for a fishing expedition,' said Daniel Small, the lawyer for SG Limited and SG Perfect Limited, which ran the StockGeneration Web site.

"`Investors' played the game by sending money--usually checks--to StockGeneration and then buying `stocks' in fictitious companies.

"The player then wins or loses money based on whether the company's value decreases or increases.

"The Web site will not operate and the company's $6.5 million in assets will remain frozen until the matter is resolved.

"…The SEC filed a complaint in June 2000 alleging that the investment offerings of SG Limited and SG Perfect Limited were nothing more than a pyramid scam that violated federal securities laws.

"…The court of appeals agreed in a ruling issued Thursday that there had been substantial disclosure as to what was going on, but also agreed with the SEC's theory that the language of the Web site essentially represented an investment contract of some kind.

"…The scheme raised hundreds of thousands of dollars, but people did not receive the promised return or even their initial investment, the SEC said.

"…The company said StockGeneration had more than 325,000 players from more than 70 countries, and had paid out millions of dollars in prizes before it was shut down."

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