Litigation Release No. 18092 / April 16, 2003
SEC SUES FREEDOM GOLF CORPORATION'S PRESIDENT, CONTROL PERSON, AND PROMOTERS IN INTERNET PUMP-AND-DUMP SCHEME
Securities and Exchange Commission v. C. Jones & Company, Carter Allen Jones, Timothy J. Miles, Gaylen P. Johnson, and Jonathan Curshen, Civil Action No. 03-WM-0636(PAC) (District of Colorado, filed April 11, 2003)
The Securities and Exchange Commission ("Commission") announced that it filed an action for injunctive relief in United States District Court in Denver, Colorado on April 11, 2003, charging four individuals with securities fraud for their participation in an alleged "pump and dump" scheme involving Freedom Golf Corporation's ("Freedom Golf") common stock. The defendants are Freedom Golf president Gaylen P. "John" Johnson; Timothy J. Miles, a principal shareholder; and two promoters, Carter Allen Jones and Jonathan Curshen. Jones' company, C. Jones & Company, also was charged.
The complaint alleges that in the fall of 1999, Miles provided a broker-dealer with false information to be filed with the National Association of Securities Dealers in order to initiate public trading of securities issued by Freedom Golf's predecessor company. The complaint also alleges that from late January through early March 2000, Miles paid two stock promoters, Jones and Curshen, to hype Freedom Golf via the Internet, telephone, and mail. Specifically, the complaint alleges that Jones arranged for the dissemination of between 25 and 35 million unsolicited "spam" e-mails touting Freedom Golf in February 2000. During the same period, the complaint continues, Johnson created baseless profit, revenue, and expense projections for Freedom Golf that Jones published on his company's Internet website, and that Curshen publicized on an Internet message board. In addition, the complaint alleges that Jones and Curshen failed to disclose the full amount that Miles was paying them to tout Freedom Golf, in violation of the federal securities laws.
The complaint further alleges that Freedom Golf's stock price and trading volume was pumped up to artificially inflated levels as a result of the false and misleading e-mails and baseless price projections. According to the complaint, during the course of this manipulation, Jones, Miles, and Curshen all sold shares of Freedom Golf stock and reaped profits of more than $500,000.
The Commission's complaint alleges that as a result of the conduct described above, C. Jones, Jones, Miles, Johnson, and Curshen violated the antifraud provisions of the federal securities laws, and C. Jones, Jones, and Curshen also violated the anti-touting provisions of the federal securities laws. The Commission seeks permanent injunctions, civil money penalties, and penny stock bars against each of the defendants, and the disgorgement of ill-gotten gains plus prejudgment interest against C. Jones, Jones, Miles, and Curshen.
In a related proceeding, the Commission instituted administrative proceedings against Freedom Golf on April 7, 2003. The proceedings will consider whether to suspend or revoke the registration of Freedom Golf's stock. For more information, see Exchange Act Release No. 47636 (April 7, 2003).