SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE NO. 16981 / May 1, 2001

Securities and Exchange Commission v. Sunstate FX Inc. et al., Case No. 01-8328-CIV-RYSKAMP (USDC/SD FL)

The Securities and Exchange Commission ("SEC" or the "Commission") announced that on April 18, 2001 it filed an emergency federal civil action against Sunstate FX, Inc. ("Sunstate"), a Boca Raton company that is purportedly in the business of trading foreign currencies, Ulrich G. Garbe ("Garbe"), Sunstate's founder and chief investment offier, Peggy L. Patterson ("Patterson"), its chief operating officer and treasurer, and John J. Hyland ("Hyland"), the company's executive vice president (collectively, "defendants"). On the same day, the Honorable Kenneth L. Ryskamp, United States District Judge for the Southern District of Florida entered, among other things, a temporary restraining order and an asset freeze to halt an on-going unregistered offering of securities by Sunstate and its principals. The Court also entered an order appointing a Receiver over Sunstate.

According to the SEC's complaint ("complaint"), Sunstate, Garbe and Hyland have been offering securities to investors both across the country and internationally. The complaint alleges that Sunstate has 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 have 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 alleges that, unbeknownst to investors, Sunstate paid its sales agents commissions totaling at least $10.6 million -- representing about 20% of the offering proceeds.

As a result, the Commission charges Sunstate, Garbe and Hyland with violations of 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 SEC further charges Patterson with violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC is also seeking in this lawsuit preliminary and permanent injunctions, disgorgement of ill-gotten profits and money penalties.

As part of a coordinated cooperative enforcement effort with the Commodity Futures Trading Commission ("CFTC"), the CFTC also simultaneously filed a civil injunctive action against Sunstate and Garbe for violations of the Commodity Exchange Act arising out of the same underlying facts.