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Sebastian River Holdings, a penny stock company, says it is suing E*Trade Financial Corporation (NASDAQ: ETFC) for "collusion amongst E-trade and its employees to unlawfully, manipulate the company's stock." The penny stock company also said that it would be "...suing under the civil section of the Racketeer Influenced and Corrupt Organizations Act (RICO)."

Sebastian River Holdings also accuses E*Trade of freezing customer accounts and not allowing "investors" to buy shares of Sebastian River Holdings.

Why wouldn't E*Trade want its clients buying Sebastian River stock?

Well, PinkSheets, the service that keeps track of the thousands of small public companies that aren't listed on exchanges, issued a "STOP: NO INFORMATION" warning on the company. According to the Pink Sheets website, this:

Indicates companies that are not able or willing to provide disclosure to the public markets - either to a regulator, an exchange or Pink Sheets. Companies in this category do not make Current Information available via Pink Sheets News Service, or if they do, the available information is older than six months. This category includes defunct companies that have ceased operations as well as 'dark' companies with questionable management and market disclosure practices. Publicly traded companies that are not willing to provide information to investors should be treated with suspicion and their securities should be considered highly risky.

Do you think that perhaps, just maybe, it's possible that shares of Sebastian River have collapsed to 2 cents per share (from a 52-week high of $3) because the company has no proof of profitability and hasn't provided any meaningful disclosures to investors? And hasn't E*TRADE been a little busy blowing money on terrible subprime mortgages to bother manipulating penny stocks?

Sebastian River shareholders are still waiting on their (I'm not making this up!) Iraqi Dinar dividend, which was supposed to be paid out on September 28th. The company blames market manipulation and says it can't figure out who its shareholders are ...

There's also some interesting gossip on the company on The Rip Off Report: Never a good sign.

If you're a Sebatian River shareholder planning to use the Dinar dividend for your next trip to the region, I wouldn't book the plane ticket just yet.