SECURITIES EXCHANGE ACT OF 1934
Release No. 42483 / March 2, 2000
ADMINISTRATIVE PROCEEDING
File No. 3-10154
|
In the Matter of
Kenneth Terrell,
Respondents |
Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order |
I.
The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Kenneth Terrell ("Terrell"), Jason Wyckoff ("Wyckoff"), Adam Altman ("Altman") and Joanne Colt (collectively, "the Respondents").
II.
In anticipation of the institution of these proceedings, the Respondents have submitted Offers of Settlement ("Offers"), which the Commission has determined to accept. Solely for the purpose of these proceedings, and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. Sec. 201.100 et seq., the Respondents, without admitting or denying the findings contained in this Order Instituting Public Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order"), except that each Respondent admits that the Commission has jurisdiction over him or her and over the subject matter of this proceeding, consent to the entry of this Order.
III.
The Commission makes the following findings:
A. Respondents
Terrell, age 25, is a permanent resident of Newton, Massachusetts, and a third year law student at a Washington, D.C. area law school. During the 1998-99 academic year, Terrell resided in Arlington, Virginia in an apartment he shared with Douglas Colt and Jason Wyckoff.
Wyckoff, age 23, is a permanent resident of Lawrenceville, New Jersey, and a third year law student at a Washington, D.C. area law school. During the 1998-99 academic year, Wyckoff resided in Arlington, Virginia, in an apartment he shared with Douglas Colt and Kenneth Terrell.
Altman, age 25, is a permanent resident of Margate, Florida. Altman graduated from a Washington, D.C. area law school in May 1999.
Joanne Colt, age 55, is a resident of Colorado Springs, Colorado and is the mother of Douglas Colt. She is currently a member of the Colorado Springs' city council. B. Other Relevant Individual
Douglas Colt, age 24, is a permanent resident of Colorado Springs, Colorado, and a third year law student at a Washington, D.C. area law school. During the 1998-99 academic year, Colt resided in Arlington, Virginia, in an apartment he shared with Kenneth Terrell and Jason Wyckoff.1
IV. Facts A. Summary
Douglas Colt ("Colt") created the "Fast-Trades.com" website which he used to manipulate the price of four stocks. Through a scheme centered on recommending stocks, Colt drove up the short-term price for each stock by as much as 700%. By trading in advance of the stock recommendations, Colt generated over $345,000 in total profits for himself, the Respondents and two of Colt's friends. At times, the profits exceeded 500% within an hour of the recommendation. Within a few hours after the recommendations were disseminated, the stock price decreased significantly from its intraday high. Colt targeted low priced, thinly traded stocks knowing that his trades and subscriber activity would artificially increase the price of the stocks selected. For each of the four stocks selected, Colt and the other participants collectively purchased a significant volume of the selected stock in three cases more than 150% of the total average daily volume.2 For all four stock selections, Fast-Trades purchases were made shortly before the website disseminated its recommendations to its subscribers.
After making these purchases and before the recommendations to purchase the stock were e-mailed to the subscribers, Colt and the other participants entered sell limit orders or had orders entered on their behalf. Colt expected that unwitting subscribers would buy the recommended stock. Colt further expected that the purchases would drive the price higher still, triggering the sell limit orders. This is precisely what happened.
Subscriber purchases were essential to the scheme. Thus, the participants needed to maintain and expand Fast-Trades' subscriber rolls. To attract new subscribers, Colt, Terrell, Wyckoff and Altman promoted the site by collectively posting hundreds of false messages to various internet message boards. These messages disguised the authors' connection with the site and misrepresented the investment success they achieved from following Fast-Trades' recommendations. Partly through these postings, the subscriber base grew to more than 9,000 people over a two month period. The Fast-Trades.com website also contained a misleading disclaimer crafted by Colt, Terrell, Wyckoff and Altman that misrepresented their trading intentions to their subscribers. The disclaimer stated that Colt and the Fast-Trades representatives "may" trade Fast-Trades selections "at any time." In fact, for each of the four stocks, Colt had already purchased the selected stock and entered sell limit orders before Fast-Trades even distributed the selection to its subscribers.
B. Colt Lays the Groundwork for the Fast-Trades.com Scheme
In late January 1999, Colt created Fast-Trades.com, an internet stock selection subscription website. Fast-Trades offered a free "six month trial period," which the website represented was a "limited time" offer, and no subscriber ever paid a fee. Subscribers received the stock selections from Fast-Trades in one of two ways: either through a password protected area of the Fast-Trades website that allowed subscribers to learn the selection twenty-four hours before it was available to the public; or by having the selection e-mailed to them at the same time it became available to subscribers on the website. Colt alone was responsible for the purported "research" and the selection of Fast-Trades recommendations. The purported research behind the selections was illusory.
Before investing, Colt conducted a test to determine what impact dissemination of his stock recommendation would have on the market. On February 1, 1999, Colt recommended the test selection, Electrosource, Inc. (ticker: ELSI). Colt observed ELSI's price increase thirty-five percent shortly after the selection was announced.
C. Colt Enlists His Roommates To Join Fast-Trades
During the 1998-99 academic year, Colt shared an apartment with two other law students, Kenneth Terrell and Jason Wyckoff. Shortly after Colt started the Fast-Trades website in late January, he offered his roommates the opportunity to participate in Fast-Trades. Colt told them that he had posted a selection on the website and monitored the market to see how his selection affected the stock. If they agreed to help, Colt would allow them to trade on Fast-Trades selections through his account. Terrell and Wyckoff agreed to participate with Colt, and during February and March 1999, the two spent numerous hours posting materially false and misleading messages on several hundred different Yahoo! internet message boards promoting the site to potential subscribers. Colt's roommates each gave Colt money to purchase shares on their behalf in Colt's brokerage account. Neither Terrell nor Wyckoff had any prior experience investing in stocks.
D. The Fast-Trades.com Scheme
After observing the upward price movement stemming from the ELSI recommendation, Colt began purchasing stock in advance of Fast-Trades selections. From February 16 through March 10, Colt, one or more Fast-Trades participants, and as many as two friends purchased shares in four Fast-Trades selections before they were provided to subscribers. As the chart below illustrates, participants in the Fast-Trades scheme and their two friends collectively purchased an increasing number of shares with each selection.
| Security | Fast Trades Related Purchases |
Av. Daily Volume |
% of Av. Daily Volume |
| Apache Med. | 5,000 | 11,694 | 43% |
| Option Care | 24,000 | 13,823 | 174% |
| Amer. Educ. | 36,283 | 3,454 | 1050% |
| Artecon | 51,512 | 154% |
For all four stock selections, Fast-Trades purchases drove up the price and volume of the stock selected even before the selection was sent out to subscribers. Non-subscribing investors who observed the increase in price and volume of the selected stock and purchased shares both before and after the release of the stock pick also helped create a price increase.
As noted, the rising price usually triggered the sell limit orders that the Fast-Trades participants who traded had previously entered. Colt, his mother Joanne Colt, Terrell and Wyckoff monitored the run-up by watching real-time market quotes.
1. Colt, Terrell and Wyckoff Purchase AMSI on February 16
Apache Medical Systems, Inc. (ticker: AMSI) was the first Fast-Trades selection in which Fast-Trades participants traded. The AMSI selection was sent out to subscribers at approximately 2:45 p.m. on February 16, 1999. Less than an hour before sending out the selection, Colt purchased 5,000 shares at $1.0625 per share in his account: 4000 for himself and 500 each for his two roommates. Colt then entered a sell limit order of $4.00 per share just before the message recommending the stock was sent to subscribers. Colt set the sell limit order based on his observing the extent of the price movement on ELSI.
Colt's purchase of 5,000 shares spurred an increase in the price and volume of AMSI stock. Colt's purchase represented over 40% of the 11,700 share total average daily volume of AMSI. In addition, between 2:25 p.m., the time Colt's purchase was reported, and 2:45 p.m., when the Fast-Trades selection was sent out, an additional 44,600 shares of AMSI were traded, and the price of AMSI rose to $1.50, a 41% increase over a twenty minute period.
After the Fast-Trades selection went out to subscribers, the trading volume and price of AMSI increased significantly. The stock had a reported one day trading volume of 1,085,600 shares and reached an intraday high of $7.9375 a price movement of $6.875, more than 600% higher than the price of Colt's first purchase. As the price of AMSI rose far above Colt's $4.00 sell limit price, Colt, watching the real-time price movement on a computer, chased the market, raising his sell price twice in a matter of minutes just after the selection went out to subscribers. Colt finally set his sell limit price at $6.00 per share, and his order was filled in 1000 share lots at prices ranging from $6.00 up to $7.75 per share. In the end, Colt, Terrell and Wyckoff reaped a collective profit of $27,937.50 on their AMSI trading in just thirty minutes. Within just a few hours after the recommendation was distributed to subscribers, the price of AMSI collapsed. Within a few days, AMSI was back to trading within pennies of its price at the time the recommendation was disseminated.
2. Colt, Terrell, Wyckoff and Joanne Colt Purchase OPTN on February 24
Fast-Trades' next selection was Option Care (ticker: OPTN). The OPTN selection went out to subscribers shortly after 11:00 a.m. on February 24, 1999. Through his account, Colt purchased twice as many shares 10,000 of OPTN as he had of AMSI. Colt purchased these shares at a price of $1.625: 8,000 for himself and 1,000 for each of his two roommates, just minutes before he sent out the selection to subscribers. Colt then entered a sell limit order of $5.00 for the shares. Colt believed that there was a "strong possibility" that OPTN would increase in price after the selection was announced.
Before Colt's 10,000 share purchase around 11:00 a.m., there were no trades in OPTN on February 24. The 10,000 share purchase represented approximately 70% of the approximately 14,000 share total average daily volume of OPTN.
After the Fast-Trades selection went out to subscribers, the price and volume of OPTN climbed rapidly. On February 24, OPTN had a reported one day trading volume of 1,290,100 shares and reached an intraday high of $5.875 a price movement of $4.25, more than 250% higher than the price of Colt's first purchase. Colt's sell limit order was filled at $5.375 shortly after the Fast-Trades announcement. Colt, Terrell and Wyckoff reaped a collective profit of $37,500. Within just a few hours after the recommendation was distributed to subscribers, the price of OPTN collapsed. Within a few days, OPTN was back to trading within pennies of its price at the time the recommendation was disseminated.
Joanne Colt had discussed the Fast-Trades website several times with her son Douglas. Joanne Colt purchased 14,000 shares of OPTN in the same manner as other subscribers: she waited until she received the Fast-Trades e-mail, and then placed her purchase orders. Because she placed market orders and the stock price was already rapidly increasing due to purchases by Douglas Colt and the other subscribers, she purchased the vast majority of her 14,000 shares not at $1.50, as she had expected, but rather at $5.00 to $5.50 per share. In effect, not unlike other subscribers, Joanne Colt became a victim of the price manipulation. Joanne Colt then immediately entered sell limit orders ranging from $7.00 to $9.00 per share. When these orders did not fill immediately and Joanne Colt learned that the price was going down below $5.00 per share, she panicked and quickly converted her sell limit orders to market orders, which were filled at prices varying from $4.56 down to $2.88 per share as the price rapidly descended from its intraday high. In the end, Joanne Colt lost more than $24,000 in approximately twenty-five minutes trading on a recommendation from the Fast-Trades website.
Shortly after her trading was completed, Joanne Colt called her son Douglas. Colt extended a $5,000 loan to Joanne Colt. Thereafter, Colt provided his mother with the Fast-Trades selections before Fast-Trades disseminated the stock recommendations to subscribers. After OPTN, Joanne Colt only placed sell limit orders prior to the release of the remaining selections. Before the next Fast-Trades selection, Joanne Colt discussed her Fast-Trades trading with a long-time friend. The friend, an inexperienced stock trader who had known the Colt family for decades, asked if she too could purchase shares in advance, and Joanne Colt agreed.
After losing more than $24,000 in Option Care, Joanne Colt withdrew $15,000 from her individual retirement account ("IRA") at a penalty and borrowed $11,000 from her life insurance policy to replace her losses and accumulate funds in her brokerage account to use to buy the next Fast-Trades selection.
3. Colt And All Respondents Purchase AEDU On March 5
The next Fast-Trades selection was American Education Corp. (ticker: AEDU), which Fast-Trades sent out to subscribers at approximately 2:45 p.m. on March 5. The total average daily volume for AEDU as of that date was approximately 3,500 shares. Starting around four hours before the selection was sent out, Colt purchased a total of 19,000 AEDU shares in his account: 10,000 for himself, 4,000 each for his two roommates, and 1,000 for Adam Altman, another law school classmate who had agreed to become a participant in Fast-Trades. Colt then entered a sell limit order for $6.50 per share. At Colt's direction, one of his friends, another fellow law student, purchased an additional 2,000 shares. Colt also instructed this friend to enter a sell limit order at $5.00 per share. Both Colt's and his friend's sell orders were entered before the message recommending AEDU was sent to subscribers.
Shortly before sending out the AEDU selection, Colt told Joanne Colt that AEDU would be the March 5 selection. Joanne Colt then called her friend. Joanne Colt then purchased 10,750 shares of AEDU and quickly placed sell limit orders staggered between $4.50 and $7.00 per share. Joanne Colt's friend who had not purchased a stock on the open market in approximately eight years purchased 4,533 shares, and quickly entered sell limit orders ranging from $4.00 to $5.00 per share.
The purchases dramatically spurred an increase in the price and volume of AEDU stock. The 36,283 shares bought by Fast-Trades participants and their friends represented over 1000% of the 3,500 share total average daily volume of AEDU. On March 5, there was only one trade reported for 1,000 shares at $1.25 per share before Colt and the others began buying. From 10:47 a.m., Douglas Colt's first trade, through the 2:45 p.m. dissemination of the Fast-Trades recommendation, over 100,000 shares of AEDU changed hands, and the price of AEDU rose to $1.625, a 30% increase in three and a half hours of trading. Moreover, both Douglas Colt and Joanne Colt were aware that their purchases were impacting the price of AEDU, because as their multiple purchase orders were filled throughout the course of the day, they paid progressively higher prices for the stock. Douglas Colt paid $1.25 for his first 1000 shares of AEDU at around 10:45 a.m., and paid incrementally higher prices until his last purchase of 3000 shares at 2:19 p.m. for $1.625 per share. Similarly, Joanne Colt paid $1.3125 per share for her first 2000 shares, and then paid progressively more until her last purchase of 2500 shares at $1.50.
After Fast-Trades recommended AEDU to subscribers, the price and volume of AEDU rose dramatically. On March 5, AEDU had a reported one day trading volume of 842,600 shares and reached an intraday high of $10.00 a price movement of $8.75, 700% higher than the price at Colt's first purchase. Colt's account reaped a profit of $41,093.75, and his friend made a profit of $3,500. Joanne Colt made $59,984.37, and her friend made $15,899. Within just a few hours, the price of AEDU collapsed, plummeting several dollars. Within a few days, AEDU was back to trading within pennies of its price at the time the recommendation was disseminated.
4. Colt and All Respondents Purchase ARTE on March 10
The fourth and final Fast-Trades selection purchased by Colt and the Respondents was Artecon, Inc. (ticker: ARTE). The ARTE selection went out to subscribers at approximately 11:30 a.m. on March 10. Starting an hour and twenty minutes before the selection was sent out, Colt purchased a total of 18,282 ARTE shares in his account: 9,282 for himself, 4,000 each for his two roommates, and 1,000 for the other law student. Colt's friend also purchased 4,000 shares at Colt's direction. Colt also telephoned Joanne Colt and told her about ARTE, and Joanne immediately called her friend. Joanne Colt purchased 17,500 shares, and her friend purchased 11,730 shares, increasing the total number of shares purchased by the group to 51,512. All entered sell limit orders before the recommendation went out to subscribers.
These purchases of ARTE spurred an increase in the price and volume of ARTE stock. The purchases of 51,512 shares by Fast-Trades participants and their friends represented over 100% of the 33,000 share total average daily volume of ARTE. On March 10, before Colt began buying ARTE, only 800 shares changed hands and the price remained steady at $1.125 per share. From 10:11 a.m., when Colt's first trade was reported, until 11:30 when the recommendation went out, total trading volume of ARTE increased to 164,500 shares and the price rose to $1.375, a 22% increase in two hours. Again, Douglas and Joanne Colt could see the effect of their purchases on the market because over the course of their purchases they paid progressively more for their ARTE shares. Colt's first purchase of ARTE was at $1.125, but in the next eighty minutes Colt made ARTE purchases at $1.1875 and then $1.25 a share, and by the time of his last purchase before the selection was announced he paid $1.375 per share. Likewise, Joanne Colt's first ARTE purchase was for $1.125 per share, but by the time of her last purchase she paid $1.34 per share.
After the Fast-Trades recommendation went out to subscribers, the price and volume of ARTE went higher still. On March 10, ARTE had a reported one day trading volume of 4,581,000 shares and reached an intraday high of $6.00 a price movement of $4.875, more than 400% higher than the price of Colt's first purchase. The orders by Fast-Trades participants and their two friends including some of Joanne Colt's orders which she converted to market orders to avoid holding the stock overnight were filled shortly after the recommendation went out. Douglas Colt's account reaped a profit of $66,516.36, Colt's friend made $15,474.37, Joanne Colt made $47,081.25, and her friend made $34,937. Within just a few hours after the recommendation, the price of ARTE collapsed, plummeting several dollars. Within a few days, ARTE was back to trading within pennies of its price at the time the recommendation was disseminated.
E. What the Respondents Knew
None of the respondents had sophisticated knowledge or understanding of stocks, and many of them did not even have a basic understanding of the securities markets. Terrell and Wyckoff had almost no experience in trading securities. Nonetheless, Terrell, Wyckoff and Altman all students with limited means gave Douglas Colt money to purchase Fast-Trades stock recommendations. Over the course of trading on four recommendations between February 16 and March 10, Colt and his roommates observed the pattern of price increase and significant decrease.3 Terrell, for example, noted that the recommendation caused a "spike" or "bubble." Joanne Colt, even after losing more than $24,000 in twenty-five minutes trading a Fast-Trades selection, borrowed money from her IRA incurring a penalty and from her insurance policy to replace her losses and to purchase stock in the next Fast-Trades selection. Both Joanne and Douglas Colt used sell limit orders with sell prices set three or four times in excess of the then-current price of the stock.
Neither Colt nor the respondents expected or wanted to hold the Fast-Trades stocks overnight. Both Douglas Colt who traded on behalf of Terrell, Wyckoff, and in two stock selections, Adam Altman and Joanne Colt entered sell limit orders immediately after purchasing the stock and before the release of these selections to other subscribers. In some cases, they chased the market up, trying to get their limit orders filled at the height of the manipulation. When those orders could not be filled due to market volatility caused by the manipulation, they quickly chased the market back down, and eventually changed their sell limit orders to market orders to ensure that all of their holdings were liquidated before the effect of the manipulation completely wore off.
F. Colt, Terrell, Wyckoff and Altman Post Messages on the Internet
As part of the Fast-Trades scheme, Colt, Terrell, Wyckoff and Altman posted hundreds of false or misleading messages on internet message boards. The vast majority of these messages were advertisements used to promote the site to prospective subscribers. The purpose of these messages was to build the subscriber base by inducing readers of the message boards to visit the website, to review its recommendations and to become subscribers, so that they would in turn purchase Fast-Trades selections and help drive up the price of the selection. Colt, Terrell, Wyckoff and later, Altman, all made such postings. Colt taught each of them how to create on-line "identities," and how to post messages to internet message boards at financial websites such as Yahoo.com and RagingBull.com. As they had been instructed by Colt, they did not disclose their affiliation with Fast-Trades and they used multiple identities to enhance the credibility of their messages. He also encouraged them to misrepresent substantive information, such as their investment successes from following Fast-Trades recommendations, to draw readers of the message boards to the Fast-Trades site.
For example, a February 9, 1999 posting by Douglas Colt to the Electrosource message bulletin board contains false information regarding Colt's age and geographic location, conveys that Colt was not a participant in Fast-Trades, and misrepresented that Colt had made profits from Fast-Trades' recommendation of Electrosource. In fact, he had not traded in the stock. Colt expected to induce individuals to visit the Fast-Trades website and become subscribers so that they would then purchase Fast-Trades selections and drive up the price of the selected stocks. Wyckoff, Terrell and Altman all made numerous similar postings that disguised their identities, failed to disclose their ties to Fast-Trades, and misrepresented their trading activity or success in trading Fast-Trades selections.
In addition to these "advertising" postings, Terrell also posted messages on the internet defending Fast-Trades from investors who accused the site of price manipulation. In those messages, Terrell misrepresented his identity, and citing securities law statutes argued that Fast-Trades' activity was lawful. In one instance, in a February 24 message posted to the Yahoo! message board related to Option Care, Terrell falsely stated that he had "tried to get the SEC to take a look into it [Fast-Trades], but apparently they can't do anything about it."
G. The Disclaimer on the Fast-Trades.com Website
From the first time Fast-Trades published a recommendation, it included a disclaimer on the webpage that purported to describe the trading intentions of Fast-Trades representatives. This disclaimer was revised after the Apache Medical Systems selection. For that selection the disclaimer stated: "We may buy or sell our picks at any time." After that selection, Colt, Terrell, Wyckoff and the new participant, Altman, revised various aspects of the disclaimer, including the portion addressing their trading in Fast-Trades selections. From that point on, through the remaining three selections they traded in, the disclaimer read, in relevant part: "FastTrades representatives may, and in many cases do, invest or hold positions in the companies that FastTrades recommends; FastTrades representatives reserve the right to buy or sell securities recommended by FastTrades at any time."
Both versions were materially misleading as to the real trading intent of the participants. By the time the subscribers received the recommendation, the Fast-Trades participants already had purchased shares in the recommended stock, and already had placed orders to sell the stock, which they expected to be filled by the increase in price and volume caused by the purchases of their own subscribers. If Fast-Trades had accurately disclosed their trading intentions, subscribers would have been able to deduce that the only reason Colt offered his "free" service was so he could further influence the market price movement initiated by his purchase of the recommended stock just before the announcement. In this way, Colt could condition the market and then profit at the expense of his subscribers by executing pre-set sales of the recommended stock at inflated prices to a market that was likely to include subscribers.
V. Legal Discussion
Section 21C of the Exchange Act authorizes the Commission to enter a cease-and-desist order against an individual that the Commission finds caused a violation of the federal securities laws due to an act or omission the person knew or should have known would contribute to such a violation. Colt effected a series of transactions and through the Fast-Trades.com website disseminated stock recommendations without completely and accurately describing those transactions in the website's disclaimer. Those transactions created actual trading activity causing the price of the selected stocks to increase. Colt's purpose was to induce the purchase of the Fast-Trades.com stock recommendation by both subscribers and non-subscribers. Colt's purchases, recommendations and misleading statements and omissions about his trading in the recommended stocks were material to reasonable investors deciding whether to purchase the securities recommended by the Fast-Trades.com website. As a result of his conduct, Colt violated Section 10(b) of the Exchange Act and Rule 10b-5, thereunder, and Terrell, Wyckoff, Altman and Joanne Colt knew or should have known that their acts or omissions to act would contribute to such violations.
VI. Conclusion
The internet today affords investors unprecedented access to information about investment opportunities. Yet the innovative technology of the internet has created new opportunities for individuals to deceive investors. Information placed on the internet instantaneously reaches thousands of individuals, and may have an unwarranted aura of legitimacy. Thus, those willing to break the law have a very effective medium to perpetrate fraud on the securities markets. The type of activity involved in this case was not new it was a variation of a "pump and dump" scheme. What was novel was the way that internet technology was used to promote the stocks and deceive investors. Attempts to deceive investors or disrupt the securities markets, whether such schemes are perpetrated on the internet or by more traditional means, will not be tolerated.
Investors on-line must be wary of self-proclaimed expert stock recommendation websites. Investors should also be suspicious of bulletin board messages and chat room "chatter" that hype a particular stock or stock recommendation website. Investors must continue to rely on the hallmarks of good investing practices: diligence, analysis and research.
VII. Findings
Based on the foregoing, the Commission finds that Terrell, Wyckoff, Altman and Joanne Colt caused Douglas Colt's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
Respondent Kenneth Terrell has submitted a sworn financial statement and other evidence demonstrating his inability to pay disgorgement plus prejudgment interest. The Commission has reviewed the sworn financial statements and other evidence provided by Terrell and has determined that he does not have the financial ability to pay disgorgement of $10,314.87 plus prejudgment interest.
Respondent Jason Wyckoff has submitted a sworn financial statement and other evidence demonstrating his inability to pay disgorgement plus prejudgment interest. The Commission has reviewed the sworn financial statements and other evidence provided by Wyckoff and has determined that he does not have the financial ability to pay disgorgement of $4,500 plus prejudgment interest.
Respondent Joanne Colt has submitted a sworn financial statement and other evidence demonstrating her inability to pay disgorgement plus prejudgment interest. The Commission has reviewed the sworn financial statements and other evidence provided by Joanne Colt and has determined that she does not have the financial ability to pay disgorgement of $157,901.62 plus prejudgment interest.
VIII. Order
Accordingly, it is hereby ordered that:
Pursuant to Section 21C of the Exchange Act, Terrell, Wyckoff, Altman and Joanne Colt cease and desist from committing or causing any violation and any future violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder;
It is further ordered that Respondent Terrell shall pay disgorgement of $10,314.87 plus prejudgment interest, but that payment of such amount be waived based upon the Respondent's demonstrated financial inability to pay;
It is further ordered that Respondent Wyckoff shall pay disgorgement of $4,500 plus prejudgment interest, but that payment of such amount be waived based upon the Respondent's demonstrated financial inability to pay;
It is further ordered that Respondent Joanne Colt shall pay disgorgement of $157,901.62 plus prejudgment interest, but that payment of such amount be waived based upon the Respondent's demonstrated financial inability to pay;
It is further ordered that the Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether each Respondent provided accurate and complete financial information at the time such representations were made; and (2) seek any additional remedies that the Commission would be authorized to impose in this proceeding if that Respondent's offer of settlement had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by each Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect and whether any additional remedies should be imposed. No Respondent may, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
Secretary
Footnotes
1 Concurrent with the filing of this Order, the Commission filed a civil injunctive action in the United States District Court for the District of Columbia against Douglas Colt seeking a permanent injunction from violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and seeking disgorgement, penalties and prejudgment interest. At the same time, Douglas Colt, without admitting or denying the allegations in the Complaint, consented to the entry of a Final Judgment of Permanent Injunction and Other Relief for violations of the antifraud provisions of the Exchange Act. Based on his demonstrated financial inability to pay, the Commission waived disgorgement and prejudgment interest and did not seek the imposition of penalties.
2 For each of the four selections, the "total average daily volume" reflects the average number of shares bought and sold each day for approximately 200 business days immediately preceding the selection of the stock by the Fast-Trades.com website.
3 Altman saw real-time quotes on the day of the recommendation on only one occasion. He saw the quotes while unsuccessfully attempting to buy ARTE shares.