On November 4th, CoinLink posted a News excerpt entitled “Odyssey Marine Exploration accused of stock market fraud” which was aggregated from CDNN online News [Link to Article]. The story was actually a repost of an original article posted by the Sunday Times of London (UK), under a different headline “Sunken treasure ‘overvalued to lift shares of salvage firm’”.

On Monday November 12th, it was brought to our attention that the original Sunday Times article, and more specifically the derivative copy that CoinLink posted had serious and material misinformation and presented implications that were either unfounded and/or without merit.

As a result CoinLink has removed the article from our site and has apologized to Odyssey Marine Exploration. We also apologise to our readers. This is the first time in 15 years that we have removed any content from CoinLink which has been found to be from a questionable source, and we will redouble our efforts to make sure that it does not happen again.

Scott Purvis - Editor

Below is a copy of correspondence which was sent to the Sunday Times from Odyssey both before and after the article was written. We think that it speaks for itself.

*********************************************
November 8, 2007
Alastair Brett, Legal Manager
Parin Janmohamad, Letters Editor
The Sunday Times
via e-mail

Editor,

In reference to your article entitled “Sunken treasure ‘overvalued to lift shares of salvage firm” dated November 4, 2007. I rarely take issue publicly with an article in a periodical, but in this case I am afraid that I can’t let this one slip. After having been contacted by a number of people who have registered concern about the suggestion of unethical actions by Odyssey and some of its employees, I feel compelled to go on the record to point out my concerns.

On Sunday, you published an article entitled “Sunken treasure ‘overvalued to lift shares of salvage firm’”. To trumpet such a headline, one would think that an accusation of such unethical – if not criminal – activity would be accompanied by the explanation that some government agency, watchdog group, or at least a group of shareholders must have made this accusation against the company. The fact is that only an anonymous poster on a stock message board made the accusation.

With the aid of law enforcement agencies, the poster of these claims was located and a defamation suit was filed against the poster by Odyssey precisely because of his many different false and misleading accusations against the company and its officers. While it may have appeared that there were a number of different posters making some of these wild claims, it turned out that this person actually used at least four different identities to make his posts to message boards.

The article published in the Times on Sunday repeated the same libelous information without making it clear that the only source for these accusations was an individual who had made the claims anonymously.

Here are some specific comments about the article:

1. The company has steadfastly refused to provide any valuation of the Black Swan project, so it is patently false that the company has claimed any value for the treasure. Logically then, the company could not have overvalued the coins to lift shares. While it is undoubtedly the largest recovery of coins every recovered from a deep-ocean site, it is not possible to accurately estimate the value until the coins have been conserved and evaluated. This has been repeated on multiple occasions in press releases, filings and communications from the company.

2. The suggestion that the “allegation comes amid disclosures in stock exchange documents” suggests that this is the result of research that served to uncover stock sales by three employees and that the results of the research brought to light documents that proved these “allegations”. In fact these stock sales were disclosed by the company and reported widely within two days after the sale of stock as required by the rules of the Securities and Exchange Commission (SEC) and The NASDAQ Stock Market. After full disclosure of the sales by these employees, and repeated statements that the company did not predict the value of the coins recovered, the stock subsequently rose to a level higher than that price at the time of the employee sale.

3. The article states that: “Other papers show that the Florida-based company privately estimated the worth of the silver coins at £1.2m. A few days later it claimed publicly that the coins had been valued at more than 200 times that amount.” These sentences are misleading on two counts.

The first sentence suggests that the origin of this number in export documents was meant to estimate the “worth” of the coins.

The second sentence ignores the fact that the company has never “claimed publicly” any value for the coins. Here is Odyssey’s answer to the reporter’s question on this issue, which was submitted to the reporter in an email prior to the article being written:

[reporter] Why do the export licences obtained by Odyssey to ship the silver etc via Gibraltar estimate the Black Swan find at around $4m? A subsequent estimation by Nick Bruyer put this at around $500m. What is the explanation for such a significant discrepancy?

[Odyssey] “The value that was put on the export licenses was based on a rough estimate of what we believed to be our cost basis at that time. In accounting for US companies, we are required to value artifacts at our cost of recovery, which has nothing to do with retail value. For instance, we have coins from the SS Republic carried on our books at a value of a couple hundred dollars, but we have sold some of them for as much as $500,000 apiece. It is also important to note that there is no duty on coins or antiquities, so there was no benefit to us “undervaluing” the coins. As for retail value, the Company has not estimated the total potential value of the “Black Swan” recovery, and will not do so until we have conserved and priced them all.”

Although this quote from Odyssey explaining the export license number was mentioned at the end of the article, it was never mentioned that the “other papers” referred to by the reporter were, in fact the export licenses, which were explained clearly as not meant to provide a valuation of the coins.

4. The article stated the following: “Media reports put the valuation of the hoard at about £250m. On May 21 Odyssey issued another press release saying that the figure had come from estimates provided by a coin expert retained by the company and that it was “comfortable” with his calculations.”

What the company said in its May 21 press release was as follows: “The Company has not estimated the total potential value of the shipwreck, other than to estimate on a preliminary basis a wide range of potential retail prices based on the coins that have been conserved to date.

What we know is that we have recovered over 500,000 silver coins weighing over 17 tons, along with some gold coins and other artifacts. After conservation of the first 6,000 coins, we requested that a numismatist and one of the world’s most experienced coin marketers, Nick Bruyer, inspect the coins and provide an opinion of the retail pricing that we could expect from the collection.

Based on Mr. Bruyer’s opinion, Odyssey reported that we expected the retail pricing of the silver coins to range from several hundred to four thousand dollars per coin. This wide range of prices would depend on the condition, origin and date of the individual coins. We understand that in a separate interview with a reporter, Mr. Bruyer provided his opinion that the mean retail price of the coins could be approximately $1,000 based on the small sample of coins that he inspected. This was reported as a potential $500 million retail value for the coins, which explains where that figure originated.

Odyssey’s position is that until all the coins are conserved, documented and graded, it is impossible to know what the entire collection would bring at retail. Based on the coins that have been conserved to date and that he has been able to inspect, we are comfortable with Mr. Bruyer’s opinion that coins from the “Black Swan” will bring from several hundred to four thousand dollars per coin retail. These are estimates that could change significantly when the rest of the coins are conserved and do not include the cost of marketing and sales, so actual revenue to Odyssey would be much lower than retail sales prices.”

It is clear from this statement that “comfort with his calculations” referred to Odyssey’s comfort with his statement that the “coins from the “Black Swan” will bring from several hundred to four thousand dollars per coin retail”, with the clearly stated caveat that it was based on his inspection of a “small sample” of the coins and that “These are estimates that could change significantly when the rest of the coins are conserved and do not include the cost of marketing and sales, so actual revenue to Odyssey would be much lower than retail sales prices”.

5. The article states that “Instead of retaining the shares once a formal valuation had been carried out and their entitlement to the treasure confirmed, several Odyssey executives and board members started offloading their stock from May 22.” The fact that a formal valuation had not been carried out and entitlement to the treasure confirmed was made clear to the public by the company before any Odyssey executives sold stock. Again, with this information clearly available to the public, the stock price rose beyond the level at which the executives sold months after their sale.

6. The article includes the following statement: “Whatever the outcome, Odyssey’s bosses have already profited from their discovery, according to documents filed with the US Securities and Exchange Commission (SEC), the stock exchange regulator.” It then later goes on to say that the SEC would not provide a comment “this weekend.”

To a reader not familiar with the workings of a public company in the US, it may not be clear that the documents referenced were actually filed by the Odyssey employees immediately after the sale of the stock, and that information was widely available to the public. The suggestion that the SEC would not provide a comment in connection with these filings could be interpreted as suggesting that there was some regulatory investigation undertaken by the SEC. In fact, Odyssey is unaware of, and has no reason to expect, any regulatory investigation into these stock sales.

7. In mentioning the sale of stock by the three executives, it was not mentioned that John Morris, who has been battling cancer for the past two years, sold only a small percentage of his stock, and Becker, who recently retired at the age of 73, also sold stock shortly before the “Black Swan” find at much lower prices.

8. In perhaps the greatest irony of this story, the reporter writes that “John Morris and Greg Stemm, Odyssey’s founders, have previously been prosecuted by the SEC. It accused them of inflating the value of shares in a company of which they were directors by overstating the worth of salvaged artefacts. They were acquitted by a jury in 1997.” The irony? The artifacts from that shipwreck case were eventually sold for more than Morris and Stemm claimed that they were worth.

Sincerely,
Laura L. Barton
Vice President
llb@shipwreck.net

Attached is a copy of the correspondence between the writer and Odyssey prior to the publication of the article.
*************************************
From: Foggo, Daniel [mailto:daniel.foggo@sunday-times.co.uk]
Sent: Friday, November 02, 2007 3:06 PM
To: Natja Igney
Subject: as requested

Hello Nagja,

Regarding Odyssey Marine Exploration’s legal action against Jim McManus, my understanding from the
papers filed by yourselves is that he is claiming the value of the “Black Swan” find has been inflated with
the result that various executives and board members have made money on the stock market following
the press release being issued on May 18.

My questions are:

1) Why do the export licences obtained by Odyssey to ship the silver etc via Gibraltar estimate the Black
Swan find at around $4m? A subsequent estimation by Nick Bruyer put this at around $500m. What is the
explanation for such a significant discrepancy?

The value that was put on the export licenses was based on a rough estimate of what we believed to be our cost basis at that time. In accounting for US companies, we are required to value artifacts at our cost of recovery, which has nothing to do with retail value. For instance, we have coins from the SS Republic carried on our books at a value of a couple hundred dollars, but we have some them for as much as $500,000 apiece.

It is also important to note that there is no duty on coins or antiquities, so there was no benefit to us “undervaluing” the coins.

As for retail value, the Company has not estimated the total potential value of the “Black Swan” recovery, and will not do so until we have conserved and priced them all.

2) Has Mr Bruyer or his company performed work or services for Odyssey in the past? I note press
articles have stated that this is the case.

Yes, that is correct. You would be hard pressed to find any numismatist in the US that has not been involved in the sale of SS Republic coins. Mr. Bruyer is a dealer that has probably sold more Odyssey coins than any other dealer in the country, and has probably sold more shipwreck coins from other shipwrecks than almost anyone else, so he is considered one of the foremost experts in the field.

3) John Morris, David Morris, and George Becker sold shares worth approximately $2,480,000 in the 12
days following the issuing of the press release. Mr McManus has suggested, according to your legal
papers, that this was suspicious because, given the prima facie evidence of the Black Swan’s find, they
could have expected the share price to go much higher. Could you please comment?

This really doesn’t make any sense at all, and we’re not even sure what point he might be trying to make. John Morris, David Morris, and George Becker legally sold parts of their positions after the appropriate waiting period as part of their personal financial planning. All transactions were reported to the SEC in accordance with prevailing regulation, and there is nothing suspicious about it.

4) Has Odyssey had any dealings with the salvage company Subsea or Mark Gleave regarding the Black
Swan site?

No.

5) Greg Stemm has been quoted as saying that there is one particular ship that Odyssey considers most
likely to be the Black Swan. When will the company be able to reveal its true identity? It is suggested by
many people that it is in fact the Nuestra Senora de las Mercedes?

What Greg has said since then is that for every possible ship that the Black Swan coins could have come from, there is significant contradictory evidence.

Based on the archaeological research and analysis of the artifacts recovered to date, the Company has not yet been able to positively confirm the identity of the site and we have been prevented from returning to the site by Spain’s actions to gather additional evidence. When and if we confirm the identity of the site, we will notify any potential claimants at that time.

Here’s what we have stated about the “Black Swan”

- The recovery was conducted in conformity with Salvage Law and the Law of the Sea Convention, beyond the territorial waters or legal jurisdiction of any country.
- The work accomplished to date on this site has diligently followed archaeological protocols using advanced robotic technology.
- All recovered items have been legally imported into the United States and placed in a secure, undisclosed location where they are undergoing conservation and documentation.

Many thanks,
Daniel Foggo, senior reporter,

The Sunday Times +44 207 782 7730 or +44 7831 154 214