NEW YORK (CNNMoney.com) - The former CEO of a Seattle-based video game company has been charged with artificially inflating his company's stock price while he sold personal shares, commonly referred to as a pump and dump scheme.

The Securities and Exchange Commission on Tuesday accused Timothy Roberts of hiring a promoter to send junk faxes to tens of thousands of investors across the country, making it appear Infinium Labs was on the verge of launching a new gaming system, dubbed "The Phantom." Infinium, in actuality, had postponed the system's launch due to insufficient resources. It has yet to launch.

The SEC said Roberts made $422,500 from the scheme by selling more than 1.3 million shares of his own stock in the company - often without publicly disclosing those sales - and paid the promoter in Infinium Labs stock without registering the transfer with the SEC. Both activities violate federal securities laws. It is asking a U.S. District Court in Orlando, Fla., to force Roberts to surrender those proceeds, pay a civil penalty and be prohibited from ever again serving as an officer or director of a public company or participating in any offering of penny stock.

Calls to the company for comment were not returned.

Roberts, who remains chairman of Infinium Labs, owned 25 percent of the company's stock at the time of the alleged scheme.

Started in late 2002, Infinium Labs planned to offer an on-demand video game service, delivering titles to players via an online subscription. The company, in filings with the SEC, projected the system would bring in revenue of roughly $35 million within the first year.

A working prototype was shown at the E3 trade show in 2004 - and Infinium claimed the product would go on sale that November, despite the fact that it had not fully developed the software required to stream the games over the Internet, had not licensed the content for its game catalog and had not partnered with a retailer to market the system.

In filings with the SEC, the company estimated it needed $11.5 million to fund the Phantom's launch. Roberts met with stock promoter Michael Pickens that year, according to the court filing, but Pickens was unable to find investors for the company.

By fall 2004, Infinium was paying employees with stock instead of cash, according to the complaint. In November, Roberts and Pickens resumed their relationship, with Pickens allegedly offering to promote the company in a "fax campaign."

Among their other claims, the faxes said "Infinium Labs management has done the work to make sure that the product launch is 100 percent successful in January 2005." The SEC charges that there were never any plans to launch at that time, however.

Public trading of Infinium Labs stock surged when the faxes were sent. Volume was up 64 percent during the first 10 day round.

"Despite the company's poor cash position, Roberts wired Pickens $100,000 from an Infinium Labs bank account on Dec. 17, 2004," according to the filing. "On Dec. 20, 2004 and again on Dec. 31, 2004, Roberts wrote checks to Pickens totaling $100,000 from an Infinium Labs bank account."

In addition to the cash payments, the SEC also accuses Roberts of paying Pickens 4 million shares of restricted Infinium Labs stock.

The Phantom and Infinium Labs were mocked mercilessly amongst gamers in 2004 and most of 2005, many of whom were skeptical of the name - and whether the company could deliver on its promises. Hardware enthusiast site [H]ardOCP.com launched an investigative report on the company and its principals in 2003. Infinium sued for libel, but the courts found in [H]ardOCP's favor.

After its 2004 E3 appearance, the company did not return to the show. And while it has not mentioned the Phantom lately, Infinium Labs is reportedly working to distribute a unique keyboard/mouse setup for couchbound PC users.

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