United States Securities and Exchange Commission
Litigation Release No. 19054 / January 27, 2005
David Wolfson Enjoined from Violating Antifraud Provisions, Ordered to Pay $157,652, in Freedom Surf Market Manipulation Case
Securities and Exchange Commission v. Allen Z. Wolfson, et al., 2:02 CV-1086 (TC) (D. Utah)
The Securities and Exchange Commission announced today that, on January 25, 2005, in the Commission's Freedom Surf market manipulation action in U.S. District Court in Salt Lake City, one of the defendants, David Wolfson, was enjoined from violating antifraud provisions of the federal securities laws and ordered to pay a total of $157,652. David Wolfson, a resident of Los Angeles, is the son of the alleged co-architect of the Freedom Surf manipulation, defendant Allen Wolfson. Allen Wolfson was convicted in New York in March 2003 for securities fraud and other violations arising out of his scheme to manipulate the stocks of six companies.
David Wolfson consented to the entry of the judgment against him without admitting or denying the allegations in the Commission's complaint. He is the fourth of the original 17 defendants in the Freedom Surf action to settle the charges against them. The action remains pending against Allen Wolfson and 12 other defendants.
The Commission's complaint, filed on September 30, 2002, alleges the following, among other things: David Wolfson engaged in a scheme with other defendants from at least July through October 2000 to manipulate the stock of Freedom Surf, Inc., a start-up company with offices in Huntington Beach, California. Certain defendants transferred Freedom Surf stock at no cost to defendant Allen Wolfson, one of two coordinators of the manipulation. Allen and David Wolfson then called in manipulative trades to accounts that Allen Wolfson controlled, and directed a broker to advance the bid quotation in Freedom Surf stock without relation to genuine market demand or worth of the company. In this way, the Wolfsons and other defendants 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.
The judgment entered against David Wolfson enjoins him from violating Section 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 orders him to pay $86,117 in disgorgement of profits, $21,535 in prejudgment interest, and a penalty of $50,000, for a total payment of $157,652. For more information about this case, see the Commission's Litigation Release No. 17756, dated September 30, 2002.