RealTime IT News

Hitsgalore.com Founder Resigns; Stock Tanks

The founder of Hitsgalore.com reportedly has resigned in the wake of a disclosure that he was accused by the government of cheating customers at a previous ad company.

Meanwhile, the Los Angeles law firm of Weiss & Yourman issued a statement saying it has been retained by shareholders of Hitsgalore.com to investigate and pursue class action claims on behalf of investors.

The company's stock plunged more than 50 percent this week after the fraud allegations were made public. The stock closed Thursday at $9.44. At one point Thursday it was trading for as little as $8.56. It had traded as high as $20.

Rancho Cucamonga, CA-based Hitsgalore said its founder, Dorian Reed, has resigned as a director of the Internet company, according to a Bloomberg News report.

Reed established Hitsgalore.com less than a year ago, and watched its market value jump from $53 million to $1 billion within three months after its shares were listed in February. Before the listing, Hitsgalore.com told the Securities and Exchange Commission there were no suits or government inquiries involving any of its officers or employees.

But a federal fraud investigation into Reed's alleged activities had been launched a year earlier. Reed and two co-defendants last month were ordered by a federal judge to pay $613,110 to 100 customers for false claims made by Internet Business Broadcasting, a failed online advertising company.

The Federal Trade Commission accused Reed and his co-defendants of sending spam touting a 100 percent annual return on investments of $5,000 to $7,500 in IBB Internet advertising banners.

The judgment against them was entered after they failed to appear for trial. Hitsgalore.com, which offers an Internet search community, was founded in July, four months after the FTC sued Reed. Reed became chief technology officer of Hitsgalore.com and Steve Bradford, a business associate not involved with IBB, became president and chief executive. Both were directors. Hitsgalore.com said in a statement that Reed is no longer an officer of the company.

Hitsgalore.com claims investors can earn 400 percent returns, four times more than IBB promised. It says by paying $99 to sponsor banner ads, investors can earn $495 if they get "only" 20 more investors to pay $99 each.

"We do all the selling for you," the site says. "There is no limit on how many banners you can sponsor, that means no limit on your income for doing nothing more than being a sponsor."

Hitsgalore.com went public on Feb. 11 by merging with Systems Communications Inc., a publicly traded shell company.