SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Litigation Release No. 17396 / March 6, 2002
SECURITIES AND EXCHANGE COMMISSION v. DAVID ALLEN LESTER, Civil Action
No. 02CV 0424 (D.D.C.) (filed March 6, 2002)
COMMISSION SUES DAVID A. LESTER FOR
FRAUDULENT INTERNET PUMP AND DUMP SCHEME
The Commission today filed a settled action in the United States
District Court for the District of Columbia against David Allen
Lester, a resident of Dayton, Tennessee, alleging that Lester engaged
in an illegal Internet pump and dump scheme. The complaint alleges
that Lester, using an alias, transmitted at least four fraudulent,
spam e-mails for the purpose of manipulating the securities of Hayes
Corporation ("Hayes") and ChatCom, Inc. ("ChatCom"), during the period
beginning July 28, 1999 and ending August 10, 1999. A single message
about Hayes, and the first of three messages concerning ChatCom,
contained materially false information intended to make the recipient
believe that the stock price of each company was going to skyrocket.
The complaint specifically alleges that Lester sent his false e-mails
in the hopes of fooling the recipient into thinking that he or she had
accidentally been copied on a private e-mail between two other
persons. According to the complaint, Lester wanted to make the spam
e-mails seem believable and intended for the recipients to purchase
the stock of Hayes and ChatCom. Lester's scheme was designed to drive
up the stock price and thus provide him the opportunity to sell at a
profit the stock that he had previously purchased.
With respect to Hayes, Lester sent a single e-mail falsely claiming
that Hayes was about to announce a deal with AT&T to make all the
cable modems for AT&T, Comcast, and Microsoft. Lester sent this e-mail
to a large number of persons using a mass-mailing program that he had
previously downloaded from the Internet. Lester's fraudulent July 28,
1999 spam e-mail concerning Hayes had a material impact on its stock
price and trading volume. Over the next trading day, the closing price
of Hayes' stock more than doubled, its market capitalization increased
by over $1 million, and its trading volume spiked 77-fold.
The complaint further alleges that Lester took steps to hide his
identity. He created a fictitious pseudonym and disguised the spam
e-mails with a forged message header to make it appear that the
pseudonym had sent the messages. He also transmitted the fraudulent
spams through the e-mail accounts of two persons for whom he had
installed AOL accounts. At the time, Lester was a part-time computer
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION v. DAVID ALLEN LESTER, Civil Action No. 02CV 0424
FRAUDULENT INTERNET PUMP AND DUMP SCHEME
The Commission today filed a settled action in the United States District Court for the
Lester, a resident of Dayton, Tennessee, alleging that Lester engaged in an illegal Internet
The complaint alleges that Lester, using an alias, transmitted at least four fraudulent, spam
A single message about Hayes, and the first of three messages concerning ChatCom, contained
The complaint specifically alleges that Lester sent his false e-mails in the hopes of fooling
Lester wanted to make the spam e-mails seem believable and intended for the recipients to
Lester sent this e-mail to a large number of persons using a mass-mailing program that he had
1999 spam e-mail concerning Hayes had a material impact on its stock price and trading volume.
Over the next trading day, the closing price of Hayes' stock more than doubled, its market
He created a fictitious pseudonym and disguised the spam e-mails with a forged message header
He also transmitted the fraudulent spams through the e-mail accounts of two persons for whom
At the time, Lester was a part-time computer network installer through his company,
To report suspicious activity involving possible Internet fraud,
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