Fraud in 3D: VisuaLABS.

• Author: Bowal, Peter
• Position: FAMOUS CASES / Fraud in 3D: VisuaLABS

Between 1993 and 2001, VisuaLABS Inc.--the company built in Calgary, Alberta by Sheldon Zelitt--attracted thousands of investors, raised hundreds of millions of dollars in capital and grabbed the attention of the global technology press. The promise of two technologies Zelitt developed generated excitement.

In 1998, Zelitt patented a method to modify cathode ray tubes, liquid crystal display (LCD) monitors and plasma display panels to produce three dimensional images. This 3D technology represented a highly awaited potential next-step in the display and broadcast industry. The ability to add depth to televisions and computer monitors without the need for special glasses or headgear, and without the vertigo often experienced with stereoscopic displays, was very attractive to the display and broadcast industries.

The second "GroutFree" technology was a method for joining smaller LCD panels into a single large display without visible seams. When GroutFree was unveiled by press release in 2000 at the height of the technology bubble, it was enthusiastically received. In 2000, display manufacturers were unable to make large LCD screens in a cost effective manner. These large LCD displays would offer better image quality, lighter weight and lower power consumption than the then-popular plasma display panel model. In 1999, the large flat panel display market was expected to grow from $250 million to $5 billion by the year 2005.

Zelitt grew his new company, VisuaLABS Inc., around these two technologies. At its height in early 2000, the company enjoyed a market capitalization of $300 million and thousands of investors.

However, none of this technology existed. It was all hype and deception.

This article describes how the justice system dealt with this major commercial fraud.

The Fall

Zelitt kept investors and the press informed of every development by issuing press releases, filing annual reports and maintaining a conspicuous presence at trade shows. However, Zelitt was also obsessed with security. Virtually no one saw detailed demonstrations. He claimed components came from a secret military lab in the United States. The technology was stored in a vault more secure than most banks. Security guards patrolled Zelitt's house.

Zelitt made other false claims of personal heroism. Yet he was a charismatic and fanciful storyteller, which elevated his promotions and product demonstrations.

The story started to unravel at VisuaLABS' Annual General Meeting on...