SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16704 / September 15, 2000

SEC v. JESSE HOGAN, U.S. District Court for the Northern District of Illinois, Civ. Action No. 00 C 5637 (N.D. Ill. September 14, 2000)

The Securities and Exchange Commission announced today that on September 14, 2000, it filed civil fraud charges against 24 year-old British Columbia resident, Jesse Hogan ("Hogan"), for using the Internet to conduct "pump and dump" manipulations of five thinly traded stocks. In the span of one month, from July 21 through August 22, 2000, Hogan disrupted the market for five different stocks, pocketed more than $40,000 in illegal profits and caused nearly $1 million in investor losses. On September 14, 2000, the Hon. Harry D. Leinenweber, of the United States District Court for the Northern District of Illinois granted the Commission's request for a temporary restraining order and asset freeze against Hogan. In a related action, the British Columbia Securities Commission on September 14, 2000 entered an asset freeze against Hogan for the conduct alleged in the Commission's Complaint.

According to the Commission's Complaint, Hogan used the same technique for each stock manipulation. First, Hogan accumulated a substantial position in the stock of a company quoted on the NASDAQ OTC Bulletin Board. Hogan then, after the close of the market and through the opening of the market the following trading day, used between four and eight alias screen names to post hundreds of messages about the targeted Bulletin Board company on Internet message boards and sent numerous e-mails with the identical message. The spam postings and e-mails falsely claimed that a well-known "blue chip" company would soon acquire the outstanding stock of the targeted company at a substantial premium over its current market price. The spam postings and e-mails prompted a surge in the price and volume of the targeted company's stock. Hogan then liquidated his position, selling into the buying surge he created. The Complaint alleges that Hogan has realized at least $42,750 in illicit profits from his scheme. Hogan's scheme has also caused investors to suffer losses of approximately $931,000.

For Hogan's specific pump and dump manipulations, the Commission's Complaint and documents filed in support of emergency relief allege:

• RSI Systems, Inc. ("RSI Systems"): Hogan bought 25,000 shares of RSI Systems on August 18, 2000, for less than $.40 per share and a total cost of $8,617.21. After trading closed on August 21, Hogan posted hundreds of messages on numerous Internet message boards and sent e-mails falsely claiming that RSI Systems was likely to be acquired by one of two Nasdaq-listed companies for $4 per share. After Hogan's false messages appeared, the price of RSI Systems stock increased 58% on greatly increased trading volume. Hogan sold his shares of RSI Systems on August 22, realizing $2,653.52 in profits.

• Egan Systems, Inc. ("Egan"): Hogan bought 150,000 shares of Egan on August 16, 2000, for less than $.15 per share and a total cost of $17,026.62. After trading closed on August 16, Hogan posted hundreds of messages on numerous Internet message boards, under various alias screen names, and sent e-mails falsely claiming that Corel Corporation, a major software developer, was going to acquire Egan for $1.50 per share. After Hogan's false messages appeared, the price of Egan stock increased 117% on greatly increased trading volume. Hogan sold his shares of Egan on August 17, realizing $18,741.13 in profits.

• AM Communications, Inc. ("AM Communications"): Hogan bought 27,000 shares of AM Communications on July 27, 2000, for less than $.65 per share and a total cost of $16,097.28. On July 30, Hogan posted hundreds of messages, under various alias screen names, on numerous Internet message boards, and sent e-mails falsely claiming that Motorola, Inc. or Harmonic, Inc were likely to acquire AM Communications for $8 per share. After Hogan's false messages appeared, the price of AM Communications stock increased 65% on greatly increased trading volume. Hogan sold his shares of AM Communications on July 31 and August 1, realizing $5,524.75 in profits.

• Microtel International, Inc. ("Microtel"): Hogan bought 20,000 shares of Microtel on July 24, 2000, for less than $.60 a share and a total cost of $10,861.52. After the market closed on July 26, Hogan posted hundreds of messages, under various alias screen names on various Internet message boards, and also sent e-mails falsely claiming that Lucent Technologies, Inc. or F5 Networks, Inc. would soon acquire Microtel for a minimum of $5 per share. After Hogan's false messages appeared, Microtel's stock price increased 70% on greatly increased trading volume. Hogan sold his entire position in MicroTel stock on Thursday, July 27, realizing $3,674.68 in profits.

• Astrocom Corp. ("Astrocom"): On July 18, 2000, Hogan bought 25,000 shares of Astrocom at less than $.50 a share, for a total cost of $11,260.16. After the market closed on Thursday, July 20, Hogan posted hundreds of messages, under various alias screen names, on various Internet message boards, and sent e-mails falsely claiming that JDS Uniphase Corporation would acquire Astrocom for $7 per share. Hogan's false Internet postings and e-mails precipitated a buying surge in Astrocom, driving its stock price up more than 200%, on greatly increased trading volume. Hogan sold his entire position in Astrocom stock on Friday, July 21, realizing $12,159.53 in profits just three days after he acquired the stock.

The Commission's Complaint charges that Hogan's scheme violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission requests a temporary restraining order, preliminary and permanent injunctions against future violations of the antifraud provisions, disgorgement of ill-gotten gains, an asset freeze, an accounting, expedited discovery and an order prohibiting the destruction of documents.

The Commission thanks the British Columbia Securities Commission, the Ontario Securities Commission and the NASD for their assistance in this matter.

http://www.sec.gov/litigation/litreleases/lr16704.htm