The SEC has filed charges against Chimera Energy, a Houston-based penny stock scam, and four individuals for their purported involvement in a pump-and-dump scam that made over $4.5 million in illicit proceeds. Investors were led to believe that the company was creating technology that would allow for oil-and-gas production that was environmentally friendly.
The regulator claims that Andrew I. Farmer set up Chimera Energy and secretly got control of all the shares issued in an IPO. He then set up a promotional campaign to hype the stock, touting technology that would extract shale oil without fracking.
In the alleged Texas securities fraud, Chimera Energy claimed that an entity named China Inland gave it an exclusive license to develop and commercialize the non-hydraulic extraction technologies. The SEC says that China Inland is not a real company and that Chimera Energy had no such technology or even a license.
When the stock became inflated due to the false claims made by Chimera Energy, entities under Farmer’s control dumped over 6 million shares on the public markets to generate the illegal gains. In 2012, the SEC suspended Chimera Energy stock and blocked Farmer and others from dumping additional shares or misleading more investors.
Also facing SEC charges are Chimera figurehead CEOs Charles E. Grob Jr. and Baldermar Rios, who are accused of running Chimera Energy at the minimum level and approving press releases that were misleading. Carolyn Austin is charged with helping Farmer make money off his scam when she dumped Chimera Energy stock. The regulator wants permanent injunctions, financial penalties, disgorgement, prejudgment interest, penny stock bars, and officer-and-director bars.
SEC Announces Charges in Houston-Based Scheme Touting Technology to End Fracking, SEC.gov, August 15, 2014
Read the SEC Complaint (PDF)
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