A Useful Summary

Craig Malthus has written a piece on xG that they are trailing on their website (right-hand column). I made a comment a few days ago, and Craig asked for more info, which I have now provided. For those who are catching up on the xG story I thought it may make a useful summary:

"Hi Craig,

Thanks for the reply. Sure. I'll back up what I said. The beginning is probably a good place to start:

In the late '90s xG was called iDigi, run by the same directors; Rick Mooers, Roger Branton, and the inventor Joe Bobier. Besides that it had three major similarities to xG:

1) It sold similar high-tech broadband radio-modulation products, which would 'revolutionise' the market, but were 'so secret' nobody could ever know how they worked. This was because in common with the early xG modulation - they DIDN'T work. At least at anywhere near the capabilities they claimed to investors. In fact with iDigi their main investor discovered that they had actually cheated in their demo - pre-recording video on computer hard-drives that was supposedly broadcast by their system. (Link a). Link b)).

Compare this with early xG claims that their modulation was special and worked. This (link c)) analysis shows that their claims of special modulation are entirely bogus. Any number of systems could have easily achieved what they claimed was special. (Also see this entire blog by a Professor of Electrical Engineering - link d)). xG's supposed advantage lay within two inventions: their 'special' filter called the 'wavelet pass filter', and 'flash signal'. The two patents backing these up have been shown to show a laughable lack of basic communications theory. (link e, link f)). When iDigi's main investor (Icelandic pension fund LN) found out, well obviously they sued for FRAUD. Mooers obviously couldn't fight it so settled out of court, for $5m.

xG evidently knew about the problems with their modulation system, as witnessed by these emails (link g, h)), and this BER curve they put up on their web-page and later took down (link i)). Yet they continued to tell their investors who had put in their hard-earned money nothing - in direct contravention of AIM rule 11.

a)http://tinyurl.com/2w2fsko
b)http://tinyurl.com/2vx96wb
c)http://www.ka9q.net/xmax.html
d)http://tinyurl.com/3x2wtpw
e)http://tinyurl.com/29ntyvs (pdf file)
f)http://www.ka9q.net/tristate.html
g)http://tinyurl.com/39p5jm8
h)http://tinyurl.com/356884p
i)http://tinyurl.com/2bpz73p

2) In common with iDigi, xG's funding was...ummm...unusual. As you've been told instead of the usual route of showing their incredible system to any number of major institutions who would've undoubtedly cut each others throats to get a piece of it, they chose...wait for it...a boiler-room to market their stock.

With iDigi the boiler-room was, unusually for a company based in the USA, one based in Spain, the Costa del Crime: N.C.R. Capital. (I will leave it to your imagination to decide whether they chose this one to be out of reach of US legislators.) Of the funds raised destined for iDigi 50% ended up in offshore accounts never to be seen again. Did Rick Mooers know it was a boiler-room? Did he know only pennies in the dollar from investors money was going to iDigi? Well, yes he did:

"Rick Mooers came here to Spain," Dannenberg said. "He knew all about it. He knew he was getting pennies on the dollar for iDigi. Yes, he knew it was called iDigi Ltd. He gave a speech to all of us. He mentioned the fact that it was a boiler room. He didn't want it to be a boiler room. He was saying this was not something that was a boiler room deal, but it was. He was just giving us a story to go on."" (link b), page 6, also see link a)).

When iDigi folded it left the FBI and the court administrator chasing up to $30m that had gone missing. None has been recovered to my knowledge.

The link with NCR continues to this day. Palmi Sigmarsson a current xG director worked with NCR to bring in LN, via his company Spectra Kapital. Spectra promoted mainly penny stocks and have now been closed down by the finance inspectorate. The contact list for NCR was allegedly sold on to Spectra...Incidentally this same director made upto $2.25m shorting xG - his own company, as well as allowing stock he controlled to be sold for half the market rate whilst under the lock-up period. That shows confidence in xG, huh?

With xG the story is similar but the boiler-room changes to ACH securities in Geneva. (Again you will note outside US jurisdiction.) ACH were a Swedish brokerage, but have the unusual distinction of being expelled from Sweden for various shady deals (link j)). Two directors of ACH were at one time or another also directors of xG. ACH have now also been closed down by the authorities, but not before they were able to lap the share-price from $4.50 to $18...

After ACH closed, xG were left to mainly rely on unregulated stock promoters like Fredrik Walhman (mentioned in court document - link k)) page 25 onwards) to sell shares. Which he did with some success bringing in $34m investment from a millionaire called Johan Bohamn (who is also not without a 'colourful' history himself..)

Doubts raised at the beginning of the float weren't chased up.(link kk)



j)http://www.highbeam.com/doc/1G1-122629851.html
k)http://tinyurl.com/2wrsper
kk)http://tinyurl.com/35zbxqs

3)The third major similarity involves accounts, so I thank Mr Rotondo for bringing it up. In both companies Rick Mooers dramatically overstated to companies balance sheets. With iDigi (from link b) page 7):
"Mooers never fully disclosed where the money was coming from . which left all of us very uneasy," Heimann said.

He also claims that Mooers and another partner, Roger Branton, wanted to "adjust" entries in the 1999 year-end financial figures "that would show investments in the $10s (of millions) and $100 millions range by valuing their contributions at exorbitant amounts, without any reference to reality."

"They wanted to show iDigi Communications was valued at a very high level," Heimann said. ". Mooers committed fraud in several ways: by falsifying records and inflating financial statements and misleading investors with respect to the value of the company they were investing in .

"No. 2, by setting up all sorts of covert schemes with offshore entities that ended up siphoning off 50 cents on the dollar on average, of monies investors paid."

Mooers, for his part, denied those allegations and claimed Heimann "embezzled from the company."

With xG Rick was up to his old tricks - valuing the company exorbitantly. This may have been justified if the miracle modulation was real - but as I've shown they knew it wasn't, or was unworkable. The 'sales' and 'deals' they announced were really nothing of the sort. The former were mainly just adjustments to the accounts receivable (with, presumably, the knowledge of Johan Bohman) - if you do as Mr Rotondo suggested and check the last few years' accounts you'll see they've just been shifted to debt owing after one year. Very little, if anything, was actually sold in the true sense. The 'deals' were mainly just letters of intent to look at the system. There were by my count 11 such 'deals' - no business ever resulted - despite the 'miracle' nature of their technology.

All in all it paints a very bad picture of the attitude that Mr Mooers has to his investors. This is why the latest announcements (links l), m), and n)) of MBTH being involved is such a bad sign for investors. Now Mr Moores has a mechanism to cheat all the investors quite legally. No wonder Ceinwen Lloyd (xG director, and wife of Johan Bohman) is upset. She realises that the $35m they've put in is hanging in the balance.

l)http://tinyurl.com/36s7hn7
m)http://tinyurl.com/33cm4js
n)http://tinyurl.com/38fa4jx

Finally I should say that it may well be true that xG now have a cognitive radio that works. I'll leave that to people like yourself. But this must be weighed up against the appalling behaviour of Mr Mooers, and his attitude to investors and stock-market regulations. Praise must go to Rick Rotondo for putting an acceptable face to xG, and him having the honesty to say they have had a change of technology (link o)). But all this is too little, too late - it should've come years ago through the appropriate channels - the stock market regulations.

There's so much I left out - enough to write a book - but I think you'll get the picture. I can be contacted at john.prescott.dpm at gmail.com

Regards John.

o)http://tinyurl.com/39lzx62 (in comments)"

xG Laundering Money?

Hello. Welcome to my Blog about xG Technology. We know it's a scam (that's obvious!) so I'm more interested in the why and how of it. How are they scamming? Who are they scamming? The below was originally a post on the xG board on iii.co.uk, but they've obviously been warned off and keep deleting posts that are negative about xG. To be fair they also delete posts from a prominent wanker-ramper Mr Marc Dannenberg and those of his gimp Paul.

This was to another PR/ramper merchant called Gurgle who claimed it unlikely that xG were manipulating stock or Laundering money.

Gurgle,

From the stuff I've been reading both here and on wirelessexpressions.com, there seems to be some evidence for it. Here's a company without a working product, with a highly dubious history both in terms of the principals and their past technology, whose name is splashed all over the internet with 'fraud' next to it, who cannot even organize a simple demonstration of the product, who has missed deadline after deadline, who misled the market over $57M of orders, who blew deals with Skytel/National Grid/Gama/Telefonica, whose own engineers are criticizing and suing them, whose former directors have been sued for fraud, whose current directors actively shorted the stock, and who seem to be unable to even make one true factual statement in a press release. They are a laughing stock.

BUT

They are still able to somehow attract investment of (apparently) millions, upon millions of dollars. How come? Who would be so stupid to give this bunch of sharks hard won dollars? Then you dig a little deeper, try to peel of the wrapper, and you get mysterious companies based on Turks and Caicos (the mecca for drug money) who are linked to porn companies. There's a mysterious 'Billionaire' Mr Bohman who has bought 1000 worthless boxes. Why? The technology is worthless. Idiots may argue that Mr Bohman and Mr Perrystone have 'seen inside the box' and have had demonstrated to them that xMax works as described. That's quite obviously ridiculous, BECAUSE if they could demonstrate it to them, then they could demonstrate it to everybody - and Rick Mooers would be the richest man on the planet. Hasn't happened, and it won't.

AND

And then there's the 10k, 20k, 50k worth of shares that seem to go round and round usually being bought/sold at the middle of the spread. Sometime they mixed it up, and bought one day, sold the next. For over a month and a half the price was rooted to $5. Absolutely stuck like glue despite over average volume. Dig deeper and you'll find a $5 sp values the company at $500M precisely the valuation where huge bonuses get paid if the company is sold. Hmmm. With all the negativity out there (and on here) about xG do you honestly believe those were private investors actively trading this pup of a company? I knew you wouldn't. Those shares were being traded to give the impression of liquidity, and a veneer of volume.

HAVE

A look at wirelessexpressions blog, and there's a very telling part where one of the guys has got hold of Marc Dannenberg's phone records. (I assume that must've been Okey's son who's been arrested for that sort of thing). Anyway Dannenberg takes a call from the MONEY LAUNDERING part of the Swiss Police, THEN makes the following calls straight after: Frederick Wahlman, Rick Mooers, ACH. Those names ring bells right? Why should Dannenberg be calling those names in connection with MONEY LAUNDERING?

ALSO

Now consider ACH themselves. Two - count them. Two former employees there have been directors at xG. Now ask yourself why would a technology company based here in the states pick up the phone and call a dealing company in Switzerland and ask if anybody would like to be a director of a VOIP company. No experience required. No expertise needed. Just come along and we'll make you a director. Obviously they don't. The only explanation is that ACH were raising funds for xG, and the deal was those guys came on board. Why didn't xG ask a bank, or venture capitalist, or even a US/UK based dealer to come on board? Why these guys? Why ACH? Hmm....WAIT! I know the answer. It's because ACH are as fly as....

SO

Here is my theory. It's just a theory from what I've read. But I hope you guys realize why I came to this conclusion. In fact I think it's the only thing that does make sense about this crazy company.

Firstly you've gotta totally divorce the guys in the lab from all of this. They'll carry on trying to headbutt their way through the Shannon Bound without success. Most have wised up already. They are just a smokescreen. They are the proverbial corner store that Al Capone hid his yobs behind.

Secondly you've gotta realize there were two threads to their fraud:

i) The primary one was so so simple: Sell the company. Sell it for loads. The plan being to whip up some pump about the company, get the Internet bulletin boards frothing, drop names that so-and-so is bidding. Hopefully the buyer would be in such a hurry that they wouldn't actually bother checking to see if xMax actually worked. When they found it doesn't - well too bad. Have a look at the company's articles of association, on almost every page there's a reference to 'If the company is sold', '$500M valuation', '$1B valuation'. Have a check back at some of the early 2005 or so internet stuff. They're all hinting at offers for the company. Company members are rewarded bonuses to keep the SP over these valuations. It's just so blatant. It could've worked too, after all there's mugs buying oil exploration companies every year that haven't got a hope in hell of finding any oil. I doubt they even bother to look most of the time.

ii) So, xG haven't been sold. Not even to Google. The bull market's ended, and Rick Mooers is still sitting on millions upon millions of 'restricted' shares. What does he do? Give up? Nah! Not his style. He's still raking in his LEGAL salary of $70k a MONTH. (Why are shareholders so stupid as not to complain about this?) But there's no buyers, and the geeks haven't shat a miracle.

C'mon guys don't feel sorry for him. He's already planned for this. His buddies at ACH have already planned for this. They're in Switzerland (as the Swedish government has kicked them out for silly things like breaking the law) and Switzerland has advantages because there's always some Nazi, or drug lord, or tax evader who wants to clean some money. And now they have a perfect vehicle for doing so.

So imagine this guy with pots of filthy money. He can't spend it, the FBI would be all over him, but he's willing to trade 10%, 20%, of it to someone, or some company that can clean it for him. So through ACH he buys shares in xG. What he actually receives is the restricted shares from the holding of Mr Mooers. The cash gets put in a SPV in Iceland. Then ACH goes to work. Has anyone noticed that xG are THE ONLY COMPANY on AIM to use a clearing system called SIS (SegaInterSettle)? In essence it means that a broker like ACH can sit at his computer screen and trade xG shares with a like-minded partner all with the settlement being done instantly electronically. So he could, buy and sell, sell and buy, all with the same pot of money and manipulate the price to, let's say $5. He controls the price totally. He is the bid and he is the ask. (Unless a third party actually sells, but there aren't many of them) He could also slip through a few sales of these freshly laundered shares, a bit at a time, to help the poor criminal out in his retirement - the money coming out of the SPV.

Now here's a clever bit. If the share price falls it benefits xG/ACH! Imagine (for ease of math) that the criminal buys a million shares at $10 a share. So $10M goes into the SPV, with everyone taking their slice out of it. Then the price moves to $8 and ACH buy back the million for $8M, and Rick has got his shares back. They've effectively shorted their own company and made $2M. This can then be used to buy some token shares and make press releases like 'Director increases his position' or some such rubbish. And the criminal has brand new sparkling money. Everyone's a winner. If in the very unlikely event that the price rises then good for Mr Criminal, he just has to find a mug to buy his shares - but it sure as hell isn't going to be ACH doing the buying. I'd imagine the bid would collapse like a stone.

But now ACH are gone, and Rick Mooers has lost his playmate. He'd better find a new one soon as ACH's millions of shares will have to be sold by the liquidator. Who the hell is going to buy those? Is there money in the SPV to put in a bid and then find another broker to play ball? Damn Maddoff is out. So's Stanford. Hmmm......

xG Technology is a Scam

Hello truth lovers. I'm planning to post information here about the Scam that is xG Technology. It'll be fairly random and as and when, but hopefully interesting.