BROKEN ARROW, Okla. (AP) -- The owners of a technology company begun in a dorm room in 1985 have agreed to a settlement of a lawsuit the U.S. Securities and Exchange Commission filed because of alleged stock-price manipulation.
The SEC filed the lawsuit Tuesday against Heartsoft Inc., a Broken Arrow-based educational software company aimed at children in kindergarten through fifth grade.
The SEC alleges Heartsoft issued a series of misleading news releases last year that led stock prices to raise more than 1,500 percent from 21 cents to nearly $6 per share.
The news releases made claims about school use of the software and a licensing agreement to develop a "child safe" Web browser, among other things. The SEC said there was no agreement on the development of the browser and that the releases on schools were misleading.
The alleged scheme meant profits of $175,000 each for Benjamin Shell and Jimmy Butler, said Spencer Barasch, associate director of the SEC.
"Investor losses would probably be in the millions and millions of dollars," he said.
Shell and Butler, who were college buddies at Rogers State College in Claremore when they began Heartsoft, have agreed to pay back all of their trading profits and pay civil monetary penalties of $50,000 each within the next two months. The men did not claim guilt or innocence.
The company has agreed to reviews by outside counsel for the next four years of all public statements before their release.
"We allege they fraudulently drove up the market value for the stock and ultimately, when it became evident that the claims they made weren't true, the stock dropped down to the price before the scheme," Barasch said.
Barasch said the promise of repayment to stockholders is an empty one.
"The investors are not going to see the return of their losses," he said.
He said there is a possibility that the money could be disbursed, but the cost and logistics of dealing with thousands of investors makes finding and distributing the money unlikely. He said the money would go into the U.S. Treasury.
Barasch said people who have invested in Heartsoft and still have shares should check with an attorney.