FOR IMMEDIATE RELEASE 2000-20 SEC Sues Washington, DC-Area Law Students for Internet Price Manipulation Scheme; Scheme Architect's Mother -- a Colorado Springs, CO City Councilwoman -- Also Charged Washington, DC, March 2, 2000 -- The Securities and Exchange Commission today brought and settled securities charges against three current and one former Washington, DC-area law students and a Colorado Springs, CO city councilwoman for their involvement in an Internet price manipulation scheme, which generated more than $345,000 in illegal profits. The architect of the fraud, Douglas Colt, was charged in federal court with committing securities fraud. Administrative proceedings were brought against the four other individuals for conduct that contributed to Colt's violations. The SEC alleges that Douglas Colt created "Fast-trades.com," a stock recommendation web site, which he used to manipulate the price of four stocks during February and March 1999. The SEC alleges that Colt created a scheme in which he recommended stocks on the Fast-trades web site to drive up their short-term prices, sometimes by as much as 700 percent. By trading in advance of his stock recommendations, Colt generated more than $345,000 in total profits for himself, his mother Joanne Colt, three of his law school classmates, and two of his friends. At times, some of them garnered profits exceeding 500 percent within an hour of the recommendation. The SEC alleges that Douglas Colt targeted low-priced, thinly-traded stocks knowing that his trades and subscriber activity would artificially increase the price of the stocks selected. Douglas Colt and the other scheme participants allegedly purchased their selected stocks and entered sell limit orders before recommending the stocks to Fast-trades subscribers, whose numbers grew to more than 9,000 by the end of the scheme. The SEC contends that within a few hours of the recommendations to Fast-Trades subscribers, the Fast-Trades participants had "dumped" their shares at a profit. The stock prices subsequently plummeted in a matter of hours. The SEC contends that subscriber purchases were essential to the scheme. The SEC alleges that to attract new subscribers, Douglas Colt and three of his law school classmates -- Kenneth Terrell, Jason Wyckoff and Adam Altman -- promoted the website by collectively posting hundreds of false messages to various Internet message boards, including boards on the Yahoo! and Raging Bull web sites. The SEC contends that these messages disguised the authors' connection with the Fast-trades site and misrepresented the investment success they achieved from following Fast-Trades' recommendations. In addition, the SEC alleges that Douglas Colt posted a false "track record" on the Fast-Trades website touting the performance of several stocks he falsely claimed were Fast-Trades selections. Richard H. Walker, Director of the SEC's Division of Enforcement, said, "The Internet has replaced the boiler room as the stock manipulator's tool of choice. Its low cost and ease of use has attracted a new breed of persons seeking to profit at the expense of innocent investors. People who commit fraud on the Internet will quickly learn that the Enforcement Division will aggressively attack attempts to undermine the integrity of our markets. Ridding the Internet of securities fraud is a top priority of the SEC." According to the SEC's allegations, in late April, 1999, Douglas Colt boldly posted on an Internet message board unrelated to Fast-trades an eleven-point "blueprint" for how to commit a price manipulation scheme. His "posting" noted that someone who wanted to manipulate the price of a security could, among other things, "screen for thinly traded stocks in the $1 to $2 price range; ... look for one with a ... low ... volume ...; pull together information from optimistic press releases; throw in some bull**** about the company being an internet wonder; buy a bunch of this garbage stock; tell your idiot subscribers ... how great the stock is ...; dump the shares you bought; ... laugh all the way to the bank." The SEC alleges that Joanne Colt, in her first attempt to partake in her son's scheme, lost $24,000 by purchasing shares of one of Fast-trades' recommended stocks after she received the Fast-trades e-mail. Ms. Colt placed a market order in the fast- rising market, thereby incurring substantial losses. After this transaction, Joanne Colt began receiving the Fast-trades selection from her son before the recommendation was made public and entered sell limit orders, thereby permitting her to participate in the scheme and to make a profit. (The difference between market orders and limit orders is discussed in the SEC's "Tips for Online Investing: What You Need to Know About Trading In Fast-Moving Markets," which is available on the SEC web site at: http://www.sec.gov/consumer/onlitips.htm.) The SEC sued Douglas Colt in the U.S. District Court for the District of Columbia, seeking a permanent injunction, as well as disgorgement of all ill-gotten gains, including prejudgment interest, and civil money penalties. Simultaneous with the filing of the complaint, Douglas Colt consented, without admitting or denying the allegations of the complaint, to the entry of the injunction, and, based on his demonstrated financial inability to pay, the SEC waived payment of disgorgement and prejudgment interest and did not seek the imposition of a civil penalty. The SEC also entered an administrative order related to the conduct described in the complaint against four others involved in the scheme. Without admitting or denying the SEC's findings, Kenneth Terrell, Jason Wyckoff, Adam Altman and Joanne Colt consented to an Order directing them to cease and desist from committing or causing violations of the anti-fraud provisions of the Securities Exchange Act of 1934, and ordered Terrell, Wyckoff and Joanne Colt to pay disgorgement of all ill-gotten gains, including prejudgment interest. Based on Terrell, Wyckoff and Joanne Colt's demonstrated financial inability to pay, the SEC waived payment of disgorgement and prejudgment interest. Investors are encouraged to read "Avoiding Online Investment Scams: Tips for Investors," located on the SEC web site at: http://www.sec.gov/consumer/offertip.htm. Contacts: Paul V. Gerlach, Associate Director, (202) 942-4560 Paul R. Berger, Assistant Director, (202) 942-4854 # # #