Securities and Exchange Commission

Litigation Release No. 18134 / May 12, 2003

Judgments Issued in an Internet Stock Manipulation Case

Securities and Exchange Commission v. eConnect , Thomas S. Hughes, Richard Epstein, and Alliance Equities, Inc., Civil Action No. CV 02-6156 NM (MCx) (C.D. Cal.)

On May 5, 2003, the Honorable Nora M. Manella, United States District Judge for the Central District of California, entered judgments, pursuant to their consent, against: (1) EyeCashNetworks, Inc. (Pink Sheets: ECNI) of Glendale, California, formerly known as eConnect; (2) Richard Epstein, age 53, of Tampa, Florida; and (3) Alliance Equities, Inc. of Coral Springs, Florida. In the judgment against EyeCashNetworks, the Court ordered the company to disgorge $70,000 in ill-gotten gains plus prejudgment interest. The Court's judgment against Epstein and Alliance permanently enjoin each of them from future violations of the stock sale reporting provisions of the federal securities laws, Sections 13(d) and 16(a) of the Securities Exchange Act of 1934 and Rules 13d-1, 13d-2 and 16a-3 thereunder. The judgments also order Epstein and Alliance to disgorge $618,230 in ill-gotten gains plus prejudgment interest, and order Epstein to pay a civil penalty in the amount of $25,000.

In its complaint, filed August 7, 2002, the SEC alleged that EyeCashNetworks' predecessor, eConnect (OTCBB: ECNT), and its former president - Thomas S. Hughes, age 53, of Rancho Palos Verdes, California - issued false and misleading press releases and posted false statements on eConnect's websites in July 2002. These statements concern a purported $20 million investment of "AA" rated bonds that in fact were not rated, a nonexistent stock repurchase program and a purported $964,000 purchase order for eConnect's principal product. In addition, the SEC's complaint alleged that:

• During the period when the false and misleading statements were issued, both the price and trading volume of eConnect's stock increased by over 500 percent.
   
• Epstein and Alliance failed since at least May 2001 to supply the SEC and the public with a host of information regarding their eConnect stock by filing updates to Schedule 13D (a form that major shareholders of public companies must file with the SEC to disclose, among other things, how they got their shares and what they plan to do with them);
   
• In June and July 2002, Epstein and Alliance dumped over 74 million eConnect shares into the market and thereby reaped their ill-gotten gains, but failed to report these sales to the SEC and the public in a Form 4 filing (another form that insiders, such as officers, directors and major share holders, must file with the SEC to disclose, among other things, that they have bought or sold their company's stock); and
   
• In May and June 2002, Hughes purchased shares of eConnect but failed to report his purchases in a Form 4 filing.

In its complaint, the Commission charged: Hughes with violating the antifraud and insider transactions reporting provisions of the federal securities laws (Sections 10(b) and 16(a) of the Exchange Act and Rules 10b-5 and 16a-3 thereunder); (2) eConnect with violating the antifraud provisions of the securities laws (Section 10(b) of the Exchange Act and Rule 10b-5 thereunder); and (3) Epstein and Alliance with violating the insider transactions and stock sale reporting provisions of the federal securities laws (Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2 and 16a-3 thereunder). The Commission also seeks civil penalties, and an officer and director bar against Hughes. The litigation against Hughes is continuing.

In August 2002, Hughes was indicted for his 2002 conduct by a grand jury impaneled by the United States Attorney's Office for the Central District of California on seven criminal charges, including three counts of securities fraud under the Exchange Act, three counts of wire fraud and one count of criminal contempt. United States v. Thomas S. Hughes, CR-02-M-1648 (C.D. Cal) (Lit. Rel. No. 17709). The criminal contempt charge is based upon Hughes' violation of a permanent injunction against him that the Commission obtained in April 2000 in the case SEC v. eConnect and Thomas S. Hughes, Civil Action Number CV-00-2959 MMM (Rcx) (C.D. Cal.)(Lit. Rel. No. 16481).

This case is the product of an investigation by the Securities and Exchange Commission, the United States Attorney's Office in Los Angeles, and the Federal Bureau of Investigation, which received assistance from NASD Regulation, Inc.