Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, March 11, 2009

Court Enjoins Promoter in Internet Pump and Dump Scheme

On March 6, 2009, the United States District Court for the District of Colorado, entered a final judgment against Jonathan Curshen, finding him liable for securities fraud for acting as a promoter in an internet "pump and dump" scheme. Based on the Commission's evidence at the bench trial held on April 30 and May 1, 2007, the Court concluded that in early 2000, Curshen knowingly or recklessly posted on various Internet sites baseless projections and other financial information about Freedom Golf Corporation, a now-defunct Denver-based golf club manufacturer. The Court further found that Curshen knowingly failed to disclose that he was being paid to promote Freedom Golf and was selling the company's stock at the same time he was touting the company.

According to the Court's findings, Timothy Miles, a principal shareholder of Freedom Golf, arranged for the company to hire Carter Allen Jones and Curshen to promote Freedom Golf. Jones prepared an "investor report" touting Freedom Golf based on information provided by the company's president. The report contained factually baseless profit and revenue projections for Freedom Golf, which was in dire financial condition at the time. Curshen posted a link to the report on Internet websites, despite knowing of the company's poor financial condition. Furthermore, the Court found Curshen posted numerous messages touting Freedom Golf on various Internet web sites without disclosing his receipt and sale of Freedom Golf stock in exchange for promoting the company.

The Court's final judgment enjoins Curshen from violating Sections 17(a) and 17(b) of the Securities Act of 1933 (Securities Act) and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5, and bars him from participating in any penny stock offering. The final judgment also orders Curshen to pay disgorgement of $66,235, representing profits gained from his participation in the illegal scheme. The Court reserved jurisdiction as to prejudgment interest and a civil penalty.

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