AN American telecoms firm started by executives from the bankrupt UK computer-games group Gizmondo is being investigated by the Securities and Exchange Commission.

The US watchdog has demanded information about what Los Angeles-based Xero Mobile has been telling investors and potential investors in its drive to raise money and get its service off the ground.

Xero was set up by a number of executives from Hampshire-based Gizmondo, which went bust at the beginning of the year after losing more than £150m in 18 months.

Gizmondo launched a hand-held computer-gaming device that incorporated a global- positioning system. The firm planned to target users of the device with advertisements tailored to their specific location.

Xero’s business plan has similarities. It wants to offer students free or subsidised mobile-phone calls as long as they agree to receive advertisements on their mobile.

The company has been pushing hard to recruit investors to back its project, and claims that its service will launch at the beginning of next year.

But the SEC has raised questions about Xero’s fundraising. It wants to know exactly what investors are being told to persuade them to put cash into the venture, according to correspondence seen by The Sunday Times. And the regulator wants to know what commissions and payments are being made to individuals responsible for the fundraising. The SEC told Xero to hand over information by last weekend.

Xero has tried hard to distance itself from Gizmondo and from Carl Freer, the Swede who ran the UK company, but he was in Xero’s offices when a Sunday Times reporter recently visited the premises.

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