Save the World Air, Inc. et al.

Litigation Release No. 17603 / July 9, 2002

SAVE THE WORLD AIR, INC. PERMANENTLY ENJOINED FROM FRAUDULENT ACTIVITIES

Securities and Exchange Commission v. Save the World Air, Inc. et al., 01 CV 11586 (S.D.N.Y.)

The Securities and Exchange Commission announced today that on June 27, 2002, the Honorable George B. Daniels of the United States District Court for the Southern District of New York permanently enjoined defendant Save the World Air, Inc. ("STWA") from violating the antifraud and other provisions of the federal securities laws. STWA, without admitting or denying the allegations in the Commission's Complaint, consented to the entry of the final judgment against it. STWA is a Nevada corporation headquartered in Australia with its principal offices in California, whose business involves the manufacture, licensing, and distribution of a device called the "Zero Emission Fuel Saver" ("ZEFS") device.

In its Complaint, filed December 19, 2001, the Commission alleged that from at least February 1999 through at least April 2001, STWA and its former president and CEO, Jeffrey Muller, carried out a fraudulent promotional campaign using press releases, Internet postings, an elaborate Internet website, and televised media events to disseminate false and materially misleading information about STWA's product and commercial prospects. STWA's and Muller's actions led to the artificial inflation of the price and trading volume of STWA stock, causing its market capitalization to be as much as $218,728,062. The promotional information distributed by STWA and Muller included: (1) announcements of significant licensing agreements and other important business developments, and (2) announcements concerning public automotive demonstrations that purportedly proved or would prove that the ZEFS materially reduces emissions and improves fuel economy in motor vehicles. In fact, the purported licensing agreements and other purported business events simply did not exist, and the ZEFS demonstrations did not prove that the ZEFS actually worked as represented. At the same time he publicly promoted STWA, Muller privately sold millions of shares of restricted STWA stock that, if sold at then-prevailing market prices, would have provided him with over $9 million in personal profits. He concealed these sales by failing to disclose in Commission filings, as required, any changes in his beneficial ownership in STWA. Finally, STWA and Muller made at least nine SEC filings that contain false financials statements and disclosures. For example, STWA reported $125,000 in revenue for the sale of a license that in fact it never sold, thus causing its revenues (which otherwise never were reported to be more than $10,000 throughout the entire relevant period) to be materially overstated.

The complaint further alleged that Billy Blackwelder, STWA's former marketing consultant, engaged in at least part of the manipulative scheme. He prepared and arranged to have issued at least one false press release announcing a major licensing deal, when in fact no such deal existed. Blackwelder also posted positive messages on Raging Bull, an Internet message board, without making required disclosures about compensation he received from STWA for his promotional activities.

The complaint charged STWA and Muller with violations of the antifraud and reporting provisions of the federal securities laws: Section 17(a) of the Securities Act of 1933 ("Securities Act"); Sections 10(b), 13(a), and 13(b) of the Securities Exchange Act of 1934 ("Exchange Act"); and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder. The complaint also alleged that Muller violated Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 thereunder. The complaint charged Blackwelder with violations of the antifraud and antitouting provisions, Section 17(b) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder.

Under the terms of the settlement between the Commission and STWA, STWA consents to a permanent injunction prohibiting it from violating the antifraud and reporting provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Commission's case with respect to Muller and Blackwelder is ongoing.

For tips on how to avoid Internet investment schemes, visit http://www.sec.gov/investor/pubs/cyberfraud.htm.

For more information about Internet fraud, visit http://www.sec.gov/divisions/enforce/internetenforce.htm.

To report suspicious activity involving possible Internet fraud, visit http://www.sec.gov/complaint.shtml.