SALT LAKE CITY (CN) - Zoobuh, a "safe email" service for children, claims in court that a Colorado marijuana producer spammed children with 9,600 ads promising them "one hell of a ride" in penny stock in the marijuana business, causing server spikes and crashes, damaged hardware and lost profits.
ZooBuh sued Rainbow International on Friday in Federal Court.
Rainbow, a publicly traded company, allegedly sent 9,603 messages to ZooBuh's subscribers on June 24, overloading and crashing two email servers.
ZooBuh says it received 28 additional emails promoting Rainbow's RNBI stock the next day.
According to the 16-page complaint: "RNBI is considered a penny stock that, by virtue of its low stock value, can experience high percentage gains and false inflation through a short-term purchasing frenzy created through internet promotional campaigns."
ZooBuh continued: "In an effort to create such a frenzy and in an effort to falsely inflate its stock value in the OTC [over-the-counter] market, Rainbow engaged in a mass email marketing campaign wherein it promoted its stock.
"The email promotions state RNBI is 'currently trading for 20 cents. If you can buy some shares at the current pricing you will be in for a hell of a ride as we are predicting that we will see RNBI go to a dollar by mid-July. This company is a very special one as it operates in the legal marijuana sector in Colorado. As you've probably heard, that sector is totally on fire at the moment and you would be a fool to think that marijuana is not getting legalized nationwide in the coming short while. Can you imagine what this will do to the price of RNBI? The company is already having a hard time supplying enough cannabis to its customers as it is with just Colorado and Washington allowing legal sales. Imagine when the whole country begins asking for some. At 20 cents RNBI is an absolute steal and I would load up as much as I can.'"
The emails identified USMarketAdvisor as the sender of the messages.
However, ZooBuh claims: "USMarketAdvisor is not a real business entity or registered dba, rather, it is a fraudulent and misleading fictitious name used to create a sense of legitimacy to the emails and thereby persuade the recipient that the email contains legitimate stock advice."
Additional companies in the legalized marijuana sector, including Integrated Cannabis Solutions, have engaged in email promotions that catapulted their stock value, ZooBuh claims, only to be halted by the Securities and Exchange Commission for CAN-SPAM violations.
CAN-SPAM (Controlling the Assault of Non-Solicited Pornography and Marketing Act) bans any person from initiating "the transmission to a protected computer of a commercial electronic mail message if such person has actual knowledge, or knowledge fairly implied on the basis of objective circumstances, that a subject heading of the message would be likely to mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the contents or subject matter of the message."
ZooBuh, of Cedar Hills, claims it serves 44,000 customer accounts in all 50 states and 27 countries.
The company "currently runs it services on a network of 18 servers, many of which would be completely unnecessary but for the continuous onslaught of unlawful commercial emails (more commonly known as spam) sent to ZooBuh's servers," the complaint states.
"As the result of the ongoing spam problem, ZooBuh has experienced significant harm in the form of server spikes, server crashes, bandwidth spikes, memory exhaustion, and unrecoverable hardware failure, all of which are attributable to its receipt of spam email, including the emails in question," ZooBuh says in the lawsuit.
ZooBuh seeks an injunction, damages of $150 for each violation of three sections of the CAN-SPAM Act, treble damages, and costs.
It is represented by William Kelly Nash, with Durham, Jones & Pinegar, of Provo.