Litigation Release No. 17942 / January 21, 2003
Final Judgment Setting Disgorgement and Imposing Civil Penalties against Principals of a Boca Raton Company
Securities and Exchange Commission v. Sunstate FX Inc. et al., Case No. 01-8328-CIV-RYSKAMP (USDC/SD FL)
The Securities and Exchange Commission announced that on January 10, 2003, the United States District Court for the Southern District of Florida entered a Final Judgment Setting Disgorgement and Imposing Civil Penalties ("Final Judgment"), against Defendants Ulrich Garbe, Peggy Patterson and John Hyland, formerly principals of Sunstate FX, Inc. ("Sunstate"), a company purportedly in the business of trading foreign currency. The Final Judgment orders Garbe to pay $710,287.96 in disgorgement, $76,712.75 in prejudgment interest and a civil penalty of $120,000. Patterson is ordered to pay $228,374.09 in disgorgement, $24,665.93 in prejudgment interest and a civil penalty of $60,000. Hyland is ordered to pay $124,670.24 in disgorgement, prejudgment interest in the amount of $13,464.667 and a civil penalty of $60,000. The Final Judgment also provides for the dismissal of disgorgement and civil penalties against Sunstate as the company is no longer in operation.
The Court had previously entered, with the defendants' consent, Final Judgments of Permanent Injunction and Other Relief ("Judgments") on the following dates: Sunstate on July 10, 2001, Patterson on July 26, 2001, Hyland on October 18, 2001 and Garbe on February 26, 2002. The Judgments permanently enjoin Sunstate, Garbe and Hyland from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Judgments further enjoin Patterson from violating Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
On April 18, 2001, the SEC filed an emergency action against Sunstate, Garbe, Patterson, and Hyland seeking to enjoin them from continuing to violate the federal securities laws in connection with their ongoing, fraudulent, unregistered offer and sale of securities. The complaint alleged that Sunstate had raised over $54 million from approximately 160 investors, but that only 20% of these funds were actually used for foreign currency trading, and even these funds were only used for trading for a few short months. Instead, according to the complaint, Garbe, Patterson and Hyland misappropriated at least $2.9 million in investor funds for their own personal use, including the purchase of luxurious homes, cars and other personal items. In addition, the complaint alleged that, unbeknownst to investors, Sunstate paid its sales agents commissions totaling at least $10.6 million - representing about 20% of the offering proceeds.
See also, Litigation Release No. 16981 (May 1, 2001).