U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19201 / April 21, 2005
Securities and Exchange Commission v. Allen Z. Wolfson, et al., 2:02 CV-1086 (TC) (D. Utah)
John R. Chapman Permanently Enjoined in SEC Fraud Action
The Securities and Exchange Commission announced today that on April 15, 2005, in the Commission's Freedom Surf market manipulation action in U.S. District Court in Salt Lake City, one of the defendants, John R. Chapman, was permanently enjoined from violating the antifraud and registration provisions of the federal securities laws; permanently barred from participating in any offerings of penny stock; and ordered to pay a total of $201,499, plus post-judgment interest.
Chapman, a resident of Salt Lake City, consented to the entry of the judgment against him without admitting or denying the allegations in the Commission's complaint. He is the fifth of the original 17 defendants in the Freedom Surf action to settle the charges against them. The action remains pending against 12 other defendants.
The Commission's complaint, filed on September 30, 2002, alleges that Chapman engaged in a scheme with other defendants from at least July through October 2000 to manipulate the price of the stock of Freedom Surf, Inc., a start-up company with offices in Huntington Beach, California. During this time period, Allen Wolfson, one of two coordinators of the manipulation, controlled certain brokerage accounts in the U.S., and Chapman had trading authority over five Canadian brokerage accounts. Chapman and Wolfson, through these accounts, engaged in a series of illegal matched trades that artificially increased the price of Freedom Surf stock. Allen Wolfson then sold a block of Freedom Surf stock at a discount to a retail broker, which in turn marked up the stock and sold it to investors. Chapman also participated in the unregistered sale of Freedom Surf shares out of the Canadian accounts between March and June 2001.
The judgment entered against Chapman enjoins him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5. It also permanently bars him from participating in any offering of penny stock; and orders him to pay $64,714 in disgorgement, $16,785 in prejudgment interest and a $120,000 penalty into a district court fund, for total payments of $201,499 plus post-judgment interest.
For more information about this case, see the Commission's Litigation Release No. 17756, dated September 30, 2002; Litigation Release No. 18486, dated December 3, 2003; Litigation Release No. 18230, dated July 14, 2003; Litigation Release No. 18646, dated March 29, 2004; Litigation Release No. 19054, dated January 27, 2005.