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U.S. Securities and Exchange Commission


Litigation Release No. 16951 / April 4, 2001

S.E.C. v. Source Energy Corporation and Timothy R. Kraft, CIV 2:00CV757B (U.S.D.C., D. Utah)

On March 6, 2001, the Honorable Dee Benson, U.S. District Judge, District of Utah, issued a permanent injunction by default against Timothy R. Kraft. Kraft was enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Kraft was also ordered to pay civil money penalties which would be determined upon further motion by the Commission.

The complaint alleges that Kraft, in February of 1998, wrote and disseminated a press release stating that his company, Source Energy Corporation (Source), had entered into a joint venture agreement with a Canadian company to manufacture, operate, and market three portable natural gas refineries in the Ukrainian Republic. The press release further claims that the contract value of the three natural gas processing plants would exceed $26 million in revenue to the joint venture and the first plant would be operational by the fall of 1998. In fact, no joint venture agreement existed between the two companies before or after Kraft issued the February press release. In addition, in October 1998, Kraft wrote and distributed another press release which claimed that his company had acquired a license to proprietary technology that would allow Source to manufacture manned and remote operated underwater submersibles that had the ability to travel in deep-water at nearly four knots and perform complex work tasks that would represent new levels of efficiency in the oil and natural gas well servicing industry. The purported suppliers of the underwater submersible technology never licensed their manned or remote operated deep-water submersible technology to Source or Kraft.