By Craig A. Huffman, Esquire, Managing Partner, Securus Law Group, P.A.-
Online posts lead to $5 Million defamation verdict for Seafarer Exploration Corp.
Some unknown SOB is making things up, posting it and people actually believe the spurge of postings about a CEO and a Company. Now the poster has an audience, since he “speaks with personal knowledge” about all that he cares to make up. It’s easy, hide behind a screen name and take down the life and dreams of a company, their management, investors and shareholders by clicking “post message.” The vultures on the internet board dig in and the “facts” start to gain traction. Prices decline as investor confidence wanes and evaporates. A company’s ability to fund for needed operations becomes two time, five times or ten times more dilutive with the stock that has to be put out just to keep the lights on.
Practically every CEO of a penny stock has had the phone call from a close friend or even family member with money invested in their company. They want to know if what they read on the internet was true; was the SEC really investigating them ? Was the CEO really taking all the investors money for themselves for ? Was the company just a sham pump and dump ?
To Kyle Kennedy, President of Seafarer Exploration (OTCBB: SFRX) and Craig A. Huffman, Securus founder and Managing Partner, the response was to file suit and prosecute the case against the posting leach until blood comes out of his toes.
Seafarer, a bulletin board fully reporting company, was confronted with what became a deluge of internet postings on investorshub.com and a lesser known treasure hunting site called treasurenet.com. Seafarer was advancing on their business plan of treasure finding and recovery of what could be a gold or silver laden Spanish treasure ship from the 1500’s off the coast of Juno Beach, Florida. Little did they know that their firing of an unstable boat captain would start a 15 month journey to get out from under the fraudulent postings of “FloridaTreasureCapt” or FTC for short.
Beginning within days of his firing, Sean Murphy (AKA Floridatreasurecapt on Investorshub and Treasurenet ), who had entered into a written and agreed to settlement for his departure from the Company, had come back demanding more for what he said was property taken from him. Refusing to pay for something they didn’t owe, the CEO went about his business of getting prepared for his search and recovery permit renewal with the State of Florida’s Bureau of Archaeological Research (“BAR”). Within days posts from FTC began to appear on I-Hub and T-Net stating things about the Company that would make you think management should be bunk buddies with Bernie Madoff.
The postings began on November 22, 2009, seemingly promising that much was happening behind the public scenes to the chagrin of the unknowing shareholders:
“Seafarer will be taken to task and exposed in a judiciary of legal standing as to its myriad of labor, investment and ethical standing violations. Seafarer is, and has always been, a matter of stock . . . “
What happened next was a shocking upward spiral in the supposed “fact” and “I personally know” diatribe of falsity laden venom that seeped into the Company’s ability to carry out its business. Even then FTC was not satisfied with sticking to the online forums. He took it a step further and wrote a letter to the BAR which alleged among other things, that the Company was guilty of stock fraud and that the CEO was stealing recovered treasure and sending it to relatives back in Arkansas. Of course the BAR being the good little tax payer funded make work program they are, took all of the allegations from FTC seriously, and refused to grant the new permit extension to Seafarer. CEO Kyle Kennedy would not know the reason for the denial until some 10 months later in September 2009, until it was uncovered from a public records request by Securus’s Managing Partner Craig Huffman.
Taking the case on for someone he had known for years, and a Company he knew was admirable, and a CEO who had all the internal moral compass of Mr. Rogers, Huffman took Floridatreasurecapt to task by filing a lawsuit against him for defamat-ion, breach of contract (violating the terms of his departure agreement) and negligence (for wrecking a Company boat while using it for his own use).
Using experience from some other cases handled for defamation, the complaint was filed with the Complex Business Litigation Division (CBLD) before Judge Richard Nielsen in Tampa Florida. Jurisdiction was a given since the Company was based in Tampa, and thus the damages occurred there. Although the case could have been brought in nearly any jurisdiction since it reached people through the internet.
The postings had factual statements from FTC, who later identified himself on line as the former captain, who said on I-Hub he was fired for threatening to be a “whistleblower.” Such posts including that Seafarer had fraudulently taken money from a children’s autism foundation, that they were being investigated by the SEC, FBI, State Agencies, fraudulently submitted diving logs to BAR, that Seafarer had lost its agreement with the Admiralty Claim holder for the site, that the site could not be reached because of environ-mental agencies not permitting exploration, and that there was no treasure on the site and the whole thing was a “pump and dump” scheme.
Seafarer ‘s CEO testified as to the history of the Company, its operations and how the postings
had hurt them, including the delay in getting the permit. Other witnesses testified to how much the posts cost the company in declining stock price. On April 5, 2011, after two days of trial, hundreds of pages of evidence, and numerous witnesses, the jury deliberated for ninety minutes. The Tampa based jury found all of the postings to be false, as well FTC’s letter to the BAR. The jury came back with verdict of $5,080,000, which was $80,000 more than Huffman had argued for in his closing argument. The award was for com-pensatory damages alone, which is the actual damage they found Murphy had caused. Seafarer will have another trial phase to get an award of punitive damages to punish Murphy and to deter others from such acts. The amount of the punitive sought according to Huffman “will depend on my mood that day.” Punitive damages for willful acts are not dischargeable in bankruptcy.
Murphy (FTC) had defended himself vigorously throughout the case, throwing all sorts of motions at Seafarer, even threatening Huffman with a Florida Bar Complaint because he promised in a letter to Murphy months before the trial to get a seven figure verdict and depose everyone Murphy knew, including his family dog to pursue the judgment. Throughout the case Murphy tried to get Seafarer to settle for small amounts. When that didn’t work, he pumped up the volume on the postings, and was met with a Court injunction to keep him off all of Seafarer’s boards. Huffman was able to have all of Murphy’s defenses stricken for his conduct before trial.
In the end, the verdict shocked the internet stock posting community. It was stated and researched to be the largest public company verdict for defamation to date. But in so doing it took Company management with fortitude for fight to protect its company and its shareholders, and experienced counsel who fought the battle not as a court action, but as a war. In the end the right case of defamation under libel or slander law depends on being able to prove the falsity, the rest will fall into place.
As a prologue, on April 24, 2011, SFRX received the 3 year recovery permit from the BAR and is beginning dive operations.
