A lot of investors lost money because the US Securities and Exchange Commission (SEC) didn’t pay enough attention to early warning signals from bloggers. According to a story in today’s New York Post, a company called Absolute Health & Fitness attracted the interest of investor-focused blogs who questioned whether the company even existed following its stock price soared. The SEC’s reaction was to suspend trading on the company’s shares for 10 days, allowing the company to return to the trading scene after the suspension period ended, running up another 800% before collapsing. Apparently the stock has traded under as many as five different names over several years.

The activity had all the signs of a “flagrant pump-and-dump operation,” according to reporter Christopher Byron, who suggests that the SEC should have sought an emergency order to shut the company down and seize its books and records.

“Who actually profited from the runup is impossible to know because the company, which trades under the Nasdaq ticker symbol of AHFI, has yet to file a single financial report on itself to the SEC or anyone else ??? so who holds its stock remains totally unknown, at least to the public. Yet the history of this trash stock ??? from its name changes over time, to its various promoters and so-called “investor relations” consultants ??? has been well imbedded in the public record for years, through nearly the whole of which it seems to have escaped the attention of the SEC.”

The article chronicles the company’s exploits, and wraps up with this observation:

This company has had the lesions of fraud leaking from its every pore for years, and the SEC did nothing at all. Only after newspaper reporters in North Carolina and bloggers on the Internet did the work for the SEC did the commission even notice what was going on. And frankly, that’s just not good enough. Shame on them.