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Tokyo Joe Bombed by the SEC

n January 6 "Tokyo Joe" Park, the profane king of internet stock pickers, made financial history by managing to become the first non-broker to be slapped with an SEC civil suit for fraud. If the regulators win, it could be the landmark case that hobbles the investment mustangs of the Wild Wild Web.
     Park's alleged no-nos? One, says the SEC, is inflating his track record as a successful stock picker. Another is hyping stocks in which he has taken a position, then selling the stocks before they reach the target price he had set. In the lingo of daytraders, Park is accused of "frontrunning" and "pumping and dumping", among other things.
     The supposed victims of the alleged securities law violations are the hardcore day-traders who pay $100 or $200 a month to access Park's Societe Anonyme website. Members get first crack at Park's daily tip postings and entry into a chatroom in which Park regularly holds forth on the ins and outs of "momentum investing". And we do mean ins and outs. Park's main "momentum investing" dictum is that it's better to play hot stocks and take many small gains, sometimes even as much as ten times a day on the same stock, than to hold on in hopes of bigger gains.
     The main obstacle the SEC will face in winning its suit is the fact that Park isn't a professional investment broker or adviser. Mouthing off, even digitally, about one's personal daytrading exploits -- even while holding positions in the subject stocks -- is generally considered the kind of activity that enjoys the ironclad protection of the First Amendment free speech guarantee. What Park has been doing is routine among online stock gurus. If the SEC wins this one, it may succeed in turning the "Wild West Web" into "How Green Was My Valley".
     Tokyo Joe, as the handsome, roguish Park is universally known by the investment community, is the top name among several dozen stock pickers who preside over the boards and chatrooms of top investment sites. The tips he dispenses gratis on sites like Silicon Investor and Motley Fool Park considers advertisement for his Societe Anonyme site. The SEC considers it part of his scheme of defrauding other investors for his own gain.
     By his own account Tokyo Joe has done well as a daytrader/investment guru. He began investing in 1996 with an $80,000 stake and parlayed that to $1.5 million by April of 1999. He claimed to be "in-and-out" about $250,000 a day by then.
     Accepting his claim of 1,000 paying subscribers to the Societe Anonyme website, he should be raking in $1.2 million or more a year on subscription fees alone. Add in even a fraction of his claimed momentum investing scores and he may have racked up a paper fortune of another $3-5 million as of the end of 1999.
     What makes Park better copy than your garden variety stock guru is his gonzo personal history and lifestyle. He was born either 40 and 50 years ago in Seoul, Corea of Japanese-Corean parentage. While in his teens he ran away to Mexico to study under a mural painter in Guadalajara, Mexico and ended up in prison. On his return home he got a law degree -- either in Japan or in Corea -- and spent 14 years working as a kind of legal troubleshooter for Hyundai, Corea's top chaebol. It was at his postings in Corea, Japan, Germany, France, London, Riyadh and Tripoli that he acquired the six foreign languages that pepper his baroquely profane verbal style.
     "My job was taking care of problems, wherever they happened," he told Money last April. "They fly me into Amsterdam, Riyadh [Saudi Arabia], Tripoli [Libya] -- you think investing is tough, try suing Quaddaffi. The money was good, and the expenses! I would spend $20,000 a month on entertainment; in the '80s my entertainment budget alone was $300,000 to $500,000 a year. But I'm living out of a hotel for two weeks out of the month, no life, no girlfriend, always calling Madame Mayflower. I just got fed up."
     He claims to have negotiated a $1.5 million severance from Hyundai in 1995 with which he bought a modest Manhattan loft, then arranged to have his wife Misun and 7-year-old daughter Mimi Chloe move from London. By this version of things, he then bought and operated three Mexican restaurants with limited success, promptly closing two. By another account Park began his American life in Seattle as a condo salesman, then descended to working in a gas station before getting into the burrito-restaurant business in New York and acquiring the alias "TokyoMex".
     In either case by 1995 Park began investing through a Merrill Lynch broker but soon became disillusioned and got himself online in April of 1996. He began frequentling Motley Fool and opened his trading career with Iomega shares. Before long he tired of buying and holding stocks and switched over to the daytrading community of Silicon Investor where, by 1997, his bombastic style and a knack for smart picks earned his threads the site's top following. A year later Tokyo Joe, as he then became known, opened Societe Anonyme ("Anonymous Society") and eventually began charging those who wanted a head start on his tips.
     Joe Park is probably unworried by the SEC suit. For one, he had said he had been expecting their attention since early last year. The reality is that most who are familiar with the world of daytraders shrug when they hear about Park's alleged violations -- he's being sued for something everyone does and, more to the point, is expected to do. As a practical matter, the suit will cost Tokyo Joe some legal fees but it should be more than offset by the added publicity it will gain him and his site. In the end the disclaimers strewn throughout Park's website and his non-broker status should protect him from an adverse judgment. The SEC will probably settle out of court for some token concessions rather than risk a trial loss that could set a bad precedent for its plans to corral the redhot action of the Wild Wild Web. (1/8/00)

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