U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17670 /August 9, 2002

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.)

SEC, FBI AND U.S. ATTORNEY'S OFFICE COORDINATE TO CHARGE ECONNECT AND ITS CEO WITH SECURITIES FRAUD

On August 7, 2002, the Securities and Exchange Commission and the United States Attorney's Office for the Central District of California announced today the filing of civil and criminal charges against Thomas S. Hughes, CEO of eConnect, and civil charges against eConnect - both repeat securities law violators - for fraud in connection with a scheme to artificially inflate eConnect's stock price using false press releases and false statements on its websites. The filings were the result of investigations conducted by the Securities and Exchange Commission, the United States Attorney's Office, and the Federal Bureau of Investigation. Both eConnect, based in San Pedro, CA (symbol: ECNT), and Hughes, age 52, of Rancho Palos Verdes, CA, were previously sued by the SEC in 2000 for issuing false press releases.

The United States Attorney's Office's two-count criminal complaint, filed August 7, 2002 in Los Angeles federal court, charges Hughes with criminal contempt and securities fraud. The complaint alleges that Hughes committed criminal contempt by violating the terms of a permanent injunction issued against him in April of 2000 in the prior SEC case; that injunction prohibited Hughes from committing any future securities fraud violations. The complaint also alleges that Hughes committed securities fraud by issuing false and misleading press releases on behalf of eConnect for the purpose of fraudulently increasing the value of eConnect's stock. Hughes was arrested by FBI special agents made his initial appearance in federal court on August 7, 2002. If convicted of the securities fraud charge in the complaint, Hughes faces a maximum sentence of 10 years in federal prison and a $1,000,000 fine.

The SEC's complaint charges Hughes, eConnect, and major eConnect shareholders Richard Epstein of Tampa, Florida and Alliance Equities, Inc, of Coral Springs, Florida with various federal securities law violations. The SEC simultaneously filed an emergency action seeking over $770,000 from Epstein and Alliance Equities, over $70,000 from eConnect, and a bar against Hughes from acting as an officer or director of a publicly-traded company. The SEC previously suspended trading in eConnect stock on July 25, 2002.

The SEC alleges that since July 10, 2002, Hughes and eConnect have issued false and misleading press releases and posted false statements on eConnect's websites claiming that:

• eConnect had received a $20 million dollar investment in "AA" rated asset-backed bonds from another issuer, when in fact these bonds were not rated and have little value;

• eConnect had begun a stock repurchase program, when in fact no stock repurchase program existed; and

• eConnect had received a purchase order to sell $964,000 worth of its key product (the eCashPad), when in fact the apparent purchaser has denied any knowledge of eConnect.

In addition, the SEC's complaint alleges that:

• During the period when the false press releases were issued, both the price and trading volume of eConnect's stock increased by over 500 percent.

• Epstein and Alliance Equities 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);

• Epstein and Alliance Equities instead filed, in May 2001, a misleading Schedule 13D;

• Since June 2002 alone, Epstein and Alliance Equities have dumped over 74 million eConnect shares into the market for approximately $770,000 in trading proceeds, 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 the present action, filed in United States District Court in Los Angeles, the Commission charged Hughes with violating the antifraud and insider transactions reporting provisions of the federal securities laws, eConnect with violating the antifraud provisions of the securities laws, and Epstein and Alliance Equities with violating the insider transactions and stock sale reporting provisions of the federal securities laws. Today, August 8, 2002, the Court granted the Commission's request for injunctions and asset freezes. The preliminary hearing is scheduled for August 16, 2002. The Commission also seeks disgorgement of trading proceeds, civil penalties, and an officer and director bar against Hughes.

This is the third criminal contempt proceeding brought in the past year by the United States Attorney's Office in Los Angeles in conjunction with the SEC's Pacific Regional Office. In August 2001, Job Kjell Hovik was charged with criminal contempt and mail and wire fraud for violating an SEC injunction and defrauding investors in a purported weight loss business. In November 2001, Cary S. Greene was charged with criminal contempt and securities fraud for violating an SEC injunction and soliciting investors in a purported broadband business.

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.