BPN 1407 Nine years on: WorldOnline and its banks did mislead investors

Last weekend I was in Paris for a meeting. I don't think it is fun to be in Paris. People there get too many tourists to be nice and earn their money with unfriendliness. But during that weekend a long awaited ruling was published by the Dutch High Court on a cause celebre: WorldOnline (WOL).

The Dutch ISP WorldOnline (WOL) and the two banks ABN AMRO and Goldman Sachs have misled the investors, when the company brought its stocks to the market. And the statement of CEO, Nina Brink, saying 'I didn't sell any shares at this time' was confusing to the investors, as she had sold part of her shares to companies and friends for 6,04 US dollar per share three months before the IPO, but had this fact not mentioned in the prospectus. That is the outcome of the ruling from the Dutch High Court in the case of the investors’ association VEB against WorldOnline and her banks.

The investors’ association has represented 10.300 stock buyers since 2000, when WorldOnline brought its shares to the Amsterdam stock market. On Friday March 17, 2000 WOL was noted on the Amsterdam Stock Exchange and listed for 43 euro per share. WorldOnline picked up 1,8 billion euro. On the first day the quote went even above 50 euro, but the next day the quote dropped and kept dropping. When the press reported that Nina Brink had sold shares before the IPO, many private investors felt fooled. It was the beginning of the end for WorldOnline. On April 13, 2000 Nina Brink was dismissed as CEO and WorldOnline was sold for a fraction (5,5 billion euro in shares) of the estimated value (18 billion euro) to the Italian ISP Tiscali.

The VEB is happy with the ruling as it is a principal ruling for the private investor. A prospectus should not be misleading, the ruling said, and the WorldOnline propspectus did. The composer of the prospectus is directly responsible for the correctness of the texts and statements.

So now the dancing for the money starts. VEB and the stock buyers will look on while WorldOnline and the banks make out who will pay the bill. WorldOnline still exist as a registered company, still has money and insurance. The two banks will have to fight over their shares in the repayment.

Whether WorldOnline or the banks will claim money from Nina Brink is unknown. Her lawyer informed the press already, stating that Nina Brink will not have to pay as the founder and former CEO of WorldOnline was not involved in the composition of the prospectus. Yet the High Court did not leave much doubt in its last ruling stating that Nina Brink had been unclear about her shares and that her amount had been represented incorrectly in the prospectus.

It will still take some time for the bell to ring for the last dance and pay-out to the 10.300 private investors, some of whom only invested this one time in their lifetime.

Blog Posting Number: 1407

Tags: ISP

Dutch national police arrests front persons ABN AMRO virus attack

The High Tech Crime team of the Dutch national police has arrested 14 suspects, which have acted as front persons for a group of international cyber criminals. The front persons, twelve men and two women, used their bank accounts as conduits for fraudulent transactions from ABN AMRO clients.

In March of this year clients from the ABN AMRO bank received spam mail. Upon opening the spam mail, which looked much like ABN AMRO bank mail, the computers of the clients got infected, key logs were installed and fraudulent transactions were made. ABN AMRO informed the police of unlawful computer infringement and fraud.

In the criminal investigation it appeared that the front persons, also named money donkeys, had been recruited via spam mail. These front persons should process to the money transferred to their accounts by the victims to other front persons in Russia and Ukraine by money transfers. The Dutch front people were allowed to deduct five percent of the amounts received from the victims; an income of 2000 dollar a month was guaranteed in the spam mail.

The internet criminals made use of a series of IP addresses in use with the Russian Business Network (RBN), an internet provider in Saint Petersburg. Against the IP affidavits have been issued for involvement in child pornography, spam, fraud and other forms of cyber crime.

With false identities Dutch detectives of the High Tech Crime team have involved themselves as front persons for the cyber criminals. In one case, a detective got a transfer of 1000 euro from a Swiss bank account. The person was instructed to transfer the money to Russia in two instalments. When the money was not transferred no reaction was received.

The infected computers of ABN AMRO clients were rerouted during electronic banking to a website in Hong Kong which was a look alike of the official bank site. Thanks to the co-operation of the Hong Kong authorities data logs of the look alike sites were achieved for further investigation. Also a botherder in New Zealand was identified and arrested.

The main suspects of the criminal gang live in Russia and the Ukraine. Most likely they are computer specialists, who hide behind computer addresses which are hard to trace. They are known for several attacks on banks worldwide and are estimated to make million of euros annually. The results of the Dutch criminal investigation will be handed over to the Russian and Ukraine justice authorities.

Blog Posting Number: 956

Tags: cybercrime, spam, botherding

World Online: an old sore of the Internet hype

On Thursday an Amsterdam court ruled in the case of World Online (WOL), a former Dutch ISP. The leading banks in the IPO of WOL, ABN AMRO and Goldman Sachs had mislead the buyers. With this ruling a the road is open to a compensation of 3 billion euro for 150.000 investors.

WOL went to the stock market in 2000 on top or just after the internet hype. On Friday March 17, 2000 WOL was noted on the Stock Exchange for the first time, it was listed for 43 euro. WOL collected up 1,8 billion euro. On the first day the quote went above 50 euro, but the next day the quote dropped and kept dropping. When the press reported that CEO Nina Brink had sold shares before the IPO for 6,04 dollar, many private investors felt fooled. It was the beginning of the end for WOL. On April 13, 2000 Nina Brink was dismissed and WOL was sold to the Italian ISP Tiscali for a fraction (5,5 billion euro in shares) of the estimated value (18 billion euro).

The court says in its ruling that the banks misrepresented information in the bidding document and did not correct the much too optimistic picture WOL drew. In December 2003 the court already ruled that WOL had mislead the buyers with too optimistic press releases and should pay compensation; the company went for another legal battle.

The court case had been brought by the VEB, a Dutch association of investors. Paul de Vries said to be optimistic now about compsenrtaion. He expects to get some hundreds of millions. Compensation will have to be gotten from Tiscali and WOL and it is not unrealistic that they will attempt to get money from former CEO Nina Brink, who had not been crystal clear about the sale of shares before the IPO; she claimed that the shares had been transferred, but no price was mentioned. The court indicated that officially the price did not have to be mentioned, but Nina Brink, WOL, ABN AMRO and Goldman Sachs had not optimally informed the investor. Ninan Brink had created uncertainty, a milder qualification than misleading.

The ruling touches on three points. WOL and the banks did not paint the right picture of Nina Brinks career with a slew of bankruptcies of former companies; also as a member of the board of directors of Newtron she was responsible for a failed IPO. Besides the bidding document mentioned the company Telitel as a subsidiary of World Online, while they still were negotiating. And a series of press releases painted a too optimistic picture of co-operations with blue ribbon companies. The court judged that the banks had not done anything to temper or correct these points.

This case might have been won now by the VEB, but this is not the end. The banks have the possibility to have the case annulled. If they do so, the VEB will have to wait to put down its claim. And once they can put down the claim, solicitors for the banks will fight it. So after six years of legal battles, the investors will have wait for some more years, before they will get paid.

(Just for the record: I did not invest in WOL).

BTW The ruling comes at a bad time for ABN AMRO, as the company was in court later that Thursday. ABN AMRO had sold its American branch LaSalle in four days at 21 billion euro without consulting its shareholders. Also here, VEB brought the case and won.

Blog Posting Number: 743

Tags: internet hype

Second Life: a flight from First Life

I am a veteran in multimedia of 62 years and text oriented. When I see all the rumour around Second Life, I wonder whether I should study it better or even dive into it, like I did with blogs; but blogs are text-oriented and not part of the visual culture.

Today I read about the Dutch Protestant university, De Vrije Universiteit (VU), in Amsterdam having created a virtual department in Second Life. (The angel in the drawing below is - of course - not part of their site). The university researches the opportunities to teach and do research there. This looks logical as Second life unites students and teachers into a learning community.


Of course we had had companies toppling over each other in order be present in Second Life. The Dutch ABN Amro bank has a virtual branch in Second Life, while its competitor ING Bank will enter Second Life in the company of partners such as Rivers Run Red creating Our Virtual Holland (uncommon nationalism for Dutch people). Philips opened a concept store. Dutch Internet bureaus like Evident, IN10 and Tam Tam are present in Second Life and Evident went out to recruit new employees. Also media companies have created their virtual spot. The Dutch youth broadcaster BNN opened a hang-out. Talpa Digital opened Dropzone.

I am wondering about the hype. It is a very small group of people visiting Second Life and yet even stock quoted companies put a lot of money in a virtual space. ABN Amro bank said that they had every day some 80 people passing by. Endemol had in Big Brother only 6 people passing by. ABN Amro is getting realistic about Second Life as it notes that people passing by are disappointed when they notice that they can not bank in real time or with Linden dollars.

So is it only a hype? I am reminded of the son of a neighbour who created his own worlds. He drew maps, built houses, developed a language and designed a political system. Since he has become a nuclear scientist, he no longer is busy with the virtual world. Will we see the same thing happening in the development of Second Life. Will there be the next interesting thing overpowering this virtual world?

I see Second Life as part of the change in communication, from text into the visual culture of graphics, animation, photographs and movies. This means that veterans like me will have to get used to visuals. So Second Life is and island for the next generation. So do not trust companies like ABN Amro and ING Bank getting into this virtual world. They enter the virtual world to experiment with business; when they notice that there is no business, they will leave the virtual offices. Second Life has also good aspects too. It is a source for gaming, creativity and co-creation.

But also the aura around the hype site is tarnished by attitudes from First Life. A few days ago, the Dutch news broadcasts drew attention to the paedophile sites in Second Life. Paedophiles can design their own victims and take them; of course, for money.

I am still lurking at Second Life and questioning whether Second Life is a flight of First Life.

Blog Posting Number: 674

Tags: virtual world, second life