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SEC Euthanizes 397 "Dormant" Shells, Including Cray Computer, LA Gear

Monday, May 14, 2012, 11:20 AM ET -

by Daniel Fisher, Forbes Staff

The SEC announced today it has ordered a halt to trading in 379 “dormant” shell companies to prevent them from being “hijacked by fraudsters” and used in pump-and-dump schemes.

Among them are some of the best-known names of the 1980s and 1990s including Cray Computer, LA Gear, and Dunes Hotels & Casinos. The list also includes a stock whose name alone should serve as a warning to anybody clueless enough to invest in it: Miniscribe, the Texas disk-drive manufacturer that imploded in 1989 accounting scandal that provided an early taste of the Enron, Worldcom and Adelphia accounting frauds.

The SEC said it suspended trading to tamp down the well-worn scamster trick of buying publicly traded shells, launching them on an eye-catching new trajectory like green energy or social networking with a blizzard of press releases, and dumping millions of shares of stock on mullet investors before closing up shop.

pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

Some of the stocks have highly recognizable names, although most stopped reporting financials to the SEC years ago. Cray Computer, an offshoot of the pioneering supercomputer company Cray Research founded by Seymour Cray in Chippewa Falls, Wis. in 1972, went bankrupt in 1995.

Cray Research was sold to Silicon Graphics, was subsequently spun out as Cray Inc. and trades on Nasdaq with a $386 million market cap. Cray Computer, which filed its last report with the SEC in 1997, was still listed on Pink Sheets with a flatlined stock price.

LA Gear, which blasted its way into public consciousness on the feet of a moonwalking Michael Jackson in 1989, faded in the late 1990s and went bankrupt in January 1998. A company with the same name still sells shoes, although the original still had a ticker on the Pink Sheets.

Other faded but familiar names in the SEC’s role of death included Dunes Hotels & Casinos, which despite the name was in the grain-processing business as of its last SEC filing in 2002; Freuhof Trailer Corp.; NetObjects; and Smith Corona Corp.

Then there are the neverwuzzes who should have had their moment in the stock-market sun, but failed to achieve greatness. My favorites are Electro Brain and Ben Ezra, Weinstein Co. This last one I wrote about back when I was with Bloomberg in the 1990s. It was a company that was going to develop software to make it easier to go public.