January 15, 2002 -- The law firm of Schiffrin & Barroway, LLP announced that a class action lawsuit was filed in the United States District Court for the District of Colorado on behalf of all purchasers of the common stock of Rhythms NetConnections, Inc. (Pink Sheets: RTHMQ) ("Rhythms" or the "Company") from January 6, 2000 through April 2, 2001, inclusive (the "Class Period").

The complaint charges Rhythms NetConnections, Inc. and certain of its officers and directors with issuing false and misleading statements concerning its business and financial condition. Specifically, the complaint alleges that throughout the Class Period, Rhythms portrayed itself as a fast-growing and expanding provider of DSL services and repeatedly represented that it could continue to expand its broadband network throughout the United States and reassured investors that it was financially able to continue this expansion. As alleged in the Complaint, defendants' statements issued throughout the Class Period were materially false and misleading when made as they failed to disclose the following adverse facts which were then known to defendants or recklessly disregarded by them: (i) that Rhythms lacked the financial resources necessary to execute its business plan of a full national network expansion; (ii) that the Company's efforts to scale back its expansion plans were not meeting with success as the Company was unable to generate the necessary financing; (iii) that Rhythms was not well-funded or well-positioned to continue its growth, as the Company's expenses, including its ongoing debt payment obligations, were far outpacing its revenues and rapidly depleting the Company's cash reserves; (iv) that the Company did not have adequate cash reserves and was not sufficiently "stable" and "financially strong" that it would be able to fund Rhythms' operational needs into the first quarter of 2002, as defendants repeatedly promised investors -- defendants were not even able to keep Rhythms running though 2001, as it had earlier guaranteed; and (v) that without the influx of additional capital, Rhythms would be forced to seek bankruptcy protection, which would render Rhythms common stock worthless. While in possession of the true facts about Rhythms and its business, the Individual Defendants and other Rhythms insiders collectively sold 600,000 shares of Rhythms common stock for gross proceeds in excess of $16 million -- of which over $12.6 million alone was received by defendant Hapka -- and the Company raised hundreds of millions of dollars in preferred stock sales and debt issuances.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Schiffrin & Barroway, LLP.

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