On April 22, Business Wire contacted the FBI and notified them about the Webnode hoax. Two days later the company filed suit against the three creators of Webnode -- the first time in its history that Business Wire has sued anyone for fraud.

The climate for the Webnoders may have turned more hostile in the wake of another, more serious Net investment hoax on April 5 -- one that involved a real stock and real money. A fake Bloomberg news release announcing a takeover was posted on a free Web hosting service about PairGain Technologies, a telecommunications equipment maker. A few users on the investment board at Yahoo talked up the story, mentioning the press release and the stock popped 31 percent in one day before the hoax was exposed. Bloomberg sued the anonymous perpetrators. Soon afterward, the FBI arrested the initiator of the stunt, an employee of PairGain, and charged him with criminal fraud.

Did the PairGain incident have any influence on Business Wire's decision to sue the Webnode pranksters? Baron Tamraz says, "Not really. But the incident does point out the dangers of Internet fraud ... They're giving the Internet a very bad name."

But the hoaxsters themselves argue that they were doing the opposite -- trying to educate a gullible public to be more wary about trusting ill-founded or bogus stock tips on the Net. They made their humorous point, and those who fell for it learned a lesson without losing money.

Who are the Webnode Three? They're the sort of people you increasingly find on the Net's investment forums -- informal watchdogs who've developed a taste for lifting the lid off investment scams to see what scurries out in the light.

"I hate cockroaches," says Bill Ulrich, a Web designer who put together the Webnode.com site. "And I like to step on them." Ulrich says he tends to invest in larger technology companies, and remains skeptical but curious about new ventures: "My parents lost money on a scam stock deal, and I guess that's made me aware of what can actually go on out there."

Jeffrey Mitchell runs his own software company. When he first became involved in online investment discussions, he joined a thread led by "a hypester who attracted a huge audience that hung on his every word," Mitchell says. "Problem is, this hypester made the mistake of promoting a stock, that he claimed had a 'fully automated' solution to curing Y2K. As a programmer, this didn't make any sense and, not knowing any better, I called him on it. It became apparent that he was posting under numerous names to con people into thinking he had public support and that people were making a killing off his stock picks. I guess it just wasn't in my nature to sit back and let people whom I considered cyberbuddies get scammed."

Janice Shell, an art historian who resides in Milan and lives on the Silicon Investor threads, has paid her dues with incompetent brokers, painful margin squeezes and taking pills on speculative stocks. She's quite happy, now, to point out to others the error of their ways.

"I'm a research scholar by profession, so digging for information and then interpreting it is something I know how to do, and genuinely enjoy doing. I'd like to help educate investors to the dangers of scamsters and hypesters -- help them learn how to do real due diligence. But I have no particular sympathy for nasty and belligerent longs [people who own a stock] who do nothing but scream that we're evil because we think the company they're invested in has got some problems."

There is a small but active coterie of whistle blowers on the stock threads who seem to get their kicks by outing scam artists. Somehow, the invisible hand of the Net gathers such individuals and forms complex new compounds capable of conjuring up something like Webnode.

Call it open-source investment investigation: Without them, the investment forums might actually become the dens of iniquity they are so often portrayed to be.
salon.com | May 5, 1999

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