An EPIC Fraud?

On August 1, the SEC (Commission) charged Nicholas A. Czuczko, age 34, with civil securities fraud. Mr. Czuczko, the operator of a stock picking website, allegedly made more than $2.7 million in profits by secretly selling the stocks that he recommended as "mega bonus buys” on his site, www.thestockster.com

The Commission's complaint alleges that Czuczko, of Beverly Hills, Calif., routinely recommended obscure, thinly-traded penny stocks on his website while he personally planned to sell the stock into the rising price spurred by the recommendation(s).

Between mid-December 2005 and the end of March 2006, the Commission alleges that Czuczko paid approximately $1.15 million to Internet search companies and other web advertisers to drive traffic to the Stockster website. Ads for the Stockster site would appear on Google and Yahoo! in response to Internet searches for terms like "stocks" and "investment advice," and on popular financial websites like Marketwatch.com, TheStreet.com, and The Wall Street Journal Online.

Czuczko, who holds a Bachelor's Degree in Business Administration from the University of La Verne in La Verne, Calif., must have forgotten to take a ‘business ethics’ course while at college. His alleged “pump-and dump” scam was to buy shares of the recommended stocks shortly before posting the selection on the Stockster website. When unsuspecting Internet visitors, seduced by the enchanting sirens of greed, bought the recommended stocks and drove up the price of the shares, Czuczko sold his holdings for substantial profits (without disclosing his own sales on the Stockster site).

Czuczko is the Chairman of the Board, CEO & CFO of Epic Media, Inc. (EPMI.PK-$0.60), a multimedia company that (purportedly) packages information into marketable print and digital products. He is the majority shareholder, too, beneficially owning approximately 13.2 million shares, or 58%, of the Common Stock. [His dad, Nicholas Czuczko, Sr., beneficially owns 5.0 million shares, or 22.0%, of the Common Stock.]

The Company has changed its business model in as many years; has no established source of revenue (and no operations); and its auditors have expressed doubt as to its ability to continue as a going concern.

John Yeung, Secretary of the Board, Director, and COO since 1996, is also a graduate of the University of La Verne.

Noted alumni of the University of La Verne [which is dedicated to “sound, people-centered, values-oriented education”] include pro skateboarder, Phil Esbenshade; former Kansas City Royals-Major League Baseball pitcher, Dan Quisenberry; and Sunny Han, part of the Han twins murder conspiracy.

On Feb 15, 2004, the Company purchased assets consisting of two magazines named EVERYTHING for Men and EVERYTHING for Women from Czuczko. In return, the Company forgave a note receivable from Mr. Czuczko dated Nov 30, 1998, for the purchase of 1,000,000 Shares of Common Stock in the amount of $5,000,000 ($5.00 per Share). The Magazines had a historical book value of $44,101. Additional Paid in Capital decreased by $4,955,899, as the use of goodwill is not allowed in related party transactions as per GAAP.

In its 10-QSB filing with the SEC on July 17, 2006, the management of Epic Media disclosed its decision to discontinue the operations of the proposed magazine business, citing their belief that the “proposed magazines no longer represented a profitable venture for the Company based on the proposed budgets, the inability to hire effective talent in the Los Angeles area, along with many other factors.”

Czuczko and Yeung do not presently receive a salary for their services. They are, however, reimbursed for any “out-of-pocket expenses” incurred on the Companies behalf. In the six-months ended May 31, 2006, the Company incurred out-of-pocket expenses (General & Administrative, Consulting, and Professional Fees) of $313,776.

In a related scheme, regulators allege that in early December 2005, Czuczko recommended the purchase of Epic Media stock on a website that was the predecessor to the Stockster site. After the price of Epic Media stock spiked, Czuczko sold his shares for a small profit.

Additionally, Czuczko did not publicly disclose those trades, among others, in stock ownership forms that he was required to file with the Commission under federal securities laws.

"A fool and his money are soon parted, but seldom by another fool."