U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19713 / June 1, 2006

SEC v. Allen Z. Wolfson, et al., 2:02 CV-1086 (TC) (D. Utah)

Nine Defendants Enjoined in Freedom Surf Market Manipulation Action

SEC Completes Litigation by Winning Summary Judgment Against Three Defendants and Settling with Six Others

The Securities and Exchange Commission announced today that on May 4, 2006, the U.S. District Court in Salt Lake City granted the Commission's motion for summary judgment against defendants Allen Z. Wolfson, Mervyn A. Phelan, Sr. ("Phelan Sr.") and John Cruickshank for violating the anti-fraud provisions, and, except for Cruickshank, the registration provisions of the securities laws.

According to the undisputed facts underlying the Court's ruling, Phelan Sr., who controlled all publicly traded shares of Freedom Surf, Inc., gave Wolfson 345,000 Freedom Surf shares at no cost. Between July and October 2000, Wolfson caused the bid price of the stock to increase from $5 to $40 by calling in consistently higher bids for his brokers to enter on the OTC Bulletin Board. Wolfson also caused the price of Freedom Surf stock to rise by calling in arranged trades of Freedom Surf stock through brokerage accounts he controlled. Cruickshank aided and abetted the manipulative activity by filing false statements, at Phelan Sr.'s behest, with the National Association of Securities Dealers to get Freedom Surf stock accepted for trading.

The Court enjoined Wolfson and Phelan Sr. from violating sections 5(a), 5(c) and 17 (a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and Exchange Act Rule 10b-5. The Court enjoined Cruickshank from violating Section 10(b) of the Exchange Act. Besides enjoining the defendants, the Court ordered Wolfson to pay disgorgement of $76,562.50, prejudgment interest of $27,671, and a penalty of $110,000. The Court ordered Phelan Sr. to pay disgorgement of $73,733, prejudgment interest of $22,659; and a penalty of $110,000. The Court ordered Cruickshank to pay disgorgement of $36,895, prejudgment interest of $10,195, and a penalty of $55,000. The Court also granted the Commission's request for officer and director bars against Phelan Sr. and Cruickshank, and a penny stock bar against Phelan Sr. In a prior SEC action, Wolfson likewise received a penny stock bar.

On May 30, 2006, the Court also entered Final Judgments permanently enjoining six other defendants who had settled with the Commission without admitting or denying the allegations in the Commission's Complaint. According to the Commission's Complaint, four of the defendants, Salomon Grey Financial Corporation, Angelo Paul Koupas, Kyle Rowe, and Christopher Roundtree, sold Freedom Surf stock to individual investors after Wolfson had artificially inflated the price of the stock. Pursuant to a pre-arranged agreement with Koupas and Rowe, Wolfson sold a block of 25,000 Freedom Surf shares at a 50% discount (approximately $6 per share) to Salomon Grey, formerly a Dallas broker-dealer. Salomon Grey brokers, in turn, sold the stock to retail customers at prices over $12 per share, constituting excessive markups of 100% or more to the prevailing market price. Rowe set the prices for the retail trades at the time of each customer's order, and Roundtree executed the trades.

Under the settlements, the Court enjoined Salomon Grey, Koupas and Rowe from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5. Further, Salomon Grey was enjoined from violating, and Koupas and Rowe were enjoined from aiding and abetting violations of, Section 15(c)(1) of the Exchange Act. Roundtree was enjoined from violating Section 10(b) of the Exchange Act, and aiding and abetting violations of Section 15(c)(1) of the Exchange Act. In addition, the settlements provide that Koupas and Rowe are jointly and severally liable for disgorgement of $122,559 and prejudgment interest of $46,229. Further, Koupas and Rowe agreed to pay penalties of $75,000 and $50,000, respectively. Roundtree's settlement provides that he pay disgorgement of $1.00 and a penalty of $25,000.

In separate settled administrative proceedings, Salomon Grey has offered to have its broker-dealer registration revoked, and Koupas, Rowe and Roundtree have offered to be barred from association with a broker or dealer, with Roundtree having the right to reapply in one year.

Also, on May 30, 2006, the Court entered Final Judgments enjoining two other defendants, Feng Shui Consultants, Inc. and A-Z Professional Consultants Retirement Trust, Inc. The Commission alleged that these entities were controlled by Wolfson, and were used to set up brokerage accounts out of which Wolfson effected arranged Freedom Surf trades. Under the settlements, the Court enjoined these entities from violations of Sections 5(a), 5(c) and 17(a) of the Securities Act, Section10(b) of the Exchange Act, and Exchange Act Rule 10b-5. The Court also barred these defendants from participating in offerings of penny stock.

On May 26, 2006, the Court also granted the Commission's motion to voluntarily dismiss defendant AZW Irrevocable Trust, another entity controlled by Wolfson with a brokerage account involved in manipulative Freedom Surf trades. AZW Irrevocable Trust is believed to be defunct.

The SEC v. Wolfson litigation is now complete, except for the Commission's planned distribution to injured investors.

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; Litigation Release No. 19201, dated April 21, 2005; Litigation Release 19582, dated March 1, 2006.