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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 16517 / April 14, 2000

SECURITIES AND EXCHANGE COMMISSION v. eCONNECT AND THOMAS S. HUGHES, Civil Action No. CV 00-02959 MMM (C.D. Cal.)

The Securities and Exchange Commission ("Commission") announced that on April 7, 2000, the Honorable Margaret M. Morrow, United States District Judge for the Central District of California, issued Judgments respectively against eConnect and Thomas S. Hughes ("Hughes"). The Commission's complaint, filed on March 23, 2000, alleges that since February 28, 2000, eConnect had issued false and misleading press releases claiming: (1) eConnect and its joint venture partner had a unique licensing arrangement with Palm, Inc., a manufacturer of hand-held personal computer products; and (2) a subsidiary of eConnect had a strategic alliance with a brokerage firm concerning a system that would permit cash transactions over the Internet. The Commission further alleges that eConnect had no licensing arrangement whatsoever with Palm, Inc., and the "strategic alliance" is no more than a letter of intent between a brokerage and a joint venture partner of eConnect. The complaint further alleges that the fraudulent press releases, which were disseminated through a wire service as well as by postings on internet bulletin boards, caused a dramatic rise in the price of eConnect stock from $1.39 on February 28, 2000 to a high of $21.88 on March 9, 2000, on heavy trading volume. The Commission suspended trading in eConnect's stock on March 13, 2000. The complaint alleges that despite the trading suspension and the Commission's related investigation, eConnect and Hughes continued to issue false and misleading statements concerning eConnect's business opportunities.

The Judgments against eConnect and Hughes enjoin them from future violations of the antifraud provisions, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Judgments additionally order that eConnect and Hughes shall pay any monetary relief in amounts subsequently to be determined by the Court. eConnect and Hughes consented to the entry of the Judgments without admitting or denying the Commission's allegations.

http://www.sec.gov/litigation/litreleases/lr16517.htm

Modified:04/18/2000