Articles Posted in Oil and Gas Claims

The US Securities and Exchange Commission is charging Matthew Fox and his Wayne Energy LLC with securities fraud. The regulator brought its Texas securities case in federal district court in the city of Sherman.

According to the Commission’s complaint, Fox raised about $950K for a joint venture that was supposedly involved in reworking and recompleting an oil and gas well. However, contends the SEC, Fox raised the funds by recycling offering documents from another oil and gas company that he previously ran (that company failed) rather than customizing the paperwork to this new venture and its specific risks.

Prior to setting up Wayne Energy in 2015, Fox had run Frisco Exploratory Company and it is the latter’s offering documents that he used. The Commission claims that the offering documents made a false statement, which was that Wayne Energy would not commingle its own money with the joint venture’s funds. The documents also falsely stated that the oil and gas company was licensed as an operator with the Texas Railroad Commission.

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Business partners Janniece Kaelin and Robert Allen Helms have pleaded guilty to bilking investors of up to $20M in a Texas-based Ponzi scam. The oil and gas financiers used the funds raised for energy ventures to cover their own expenses from 1/2010 to 12/2013.

The US Securities and Exchange Commission filed a securities fraud lawsuit against Kaelin, Helms, and their companies Iron Rock Royalty Partners LP and Vendetta Royalty Partners LTD in 2013. According to the regulato, they misled investors about their professional experience, meantime raising almost $18M that were supposed to go toward royalty interests in oil and gas.

Included among the alleged purchases they made: using investors’ money to pay for a 3 1/2-week trip around the world and paying for the more than $247K wedding of Kaelin’s daughter in Hawaii.

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FINRA Bars Registered Rep For $15M In Unauthorized Trades
The Financial Industry Regulatory Authority has barred Craig David Dima, a former registered representative with KC Ward Financial, for making about $15M in unsuitable and unauthorized trades in the account of a 73-year-old retiree. According to the self-regulatory organization, there were 11 times when Dima sold nearly all of the customer’s stock in Colgate-Palmolive that she’d accrued from working with the company for nearly thirty years and he did that without permission.

After the elderly client told Dima not to sell the stock, he proceeded to sell them anyways. When the customer confronted Dima, he purportedly misrepresented that a computer or technical mistake had caused the sale. Meantime, the client was “deprived” of the “substantial dividends” from the Colgate shares she used to own. Dima charged the customer over $375K in fees, mark-downs, and mark-ups.

By settling, Dima is not denying or admitting to FINRA’s charges.

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A Financial Industry Regulatory Authority hearing panel has expelled a Plano, Texas-based brokerage firm from the industry, barred its CEO, and ordered both of them to pay customers $24.6M in restitution. Red River Securities LLC and Brian Keith Hardwick are accused of engaging in fraudulent sales involving five oil and gas joint ventures. Of the more than $25M that customers invested in the oil and gas offerings, they were paid distributions of under $500K in total.

According to the Texas securities case, the regulator claims that over a four-year period, Hardwick and the Texas brokerage firm purposely and fraudulently misrepresented and left out material facts related to interests in oil and gas joint ventures that were issued by affiliate Regal Energy LLC issued. Also, contends the SEc;

· The oil and gas ventures failed to properly represent how much income was distributed to investors in other Regal Entity joint ventures.

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An investor who is retired and suffering from health issues is seeking $1M from Morgan Stanley (MS). The investor, a former inventor, claims that the broker-dealer did not properly supervise the financial adviser who handled his multi-million dollar account.  He filed a Financial Industry Regulatory Authority claim and is accusing the firm of breach of fiduciary, negligence, unauthorized trading, excessive trading, fraudulent inducement, and significant tax liability.

The investor believes that over-concentation in risky sectors and over trading in too many individual stocks occurred, causing significant damage to his retirement funds. Among the investments that were involved were oil and gas investments, including Master Limited Partnerships. The claimant claims that Morgan Stanley hid the risks involved, even as the financial adviser engaged in a purportedly deceptive investment strategy. The result was that the investor’s account became heavily concentrated in risky investments.

The alleged broker negligence also purportedly caused tax consequences for the investor while benefiting Morgan Stanley with transactions costs of over $1M. The unsuitable taxable gains that were created by  led to investment losses for the investor, even as the broker claimed that the investor’s account was profiting.

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Texas-Based Brokerage Firm Accused of Inadequate Supervision Involving VA Exchanges
The Financial Industry Regulatory Authority is ordering IMS Securities Inc. to pay a $100K fine. The Texas-based brokerage firm is accused of failures related to its monitoring of variable annuity exchanges. By settling, however, it is not denying or admitting to the allegations. 
 
According to the self-regulatory authority, the firm exhibited inadequate supervisory procedures for “problematic rates of exchange” in transactions involving variable annuities. FINRA claims that from 7/ 15/13 through 7/8/14, IMS Securities depended on its CFO to review annuity exchanges but did not provide tools or guidance to help look for “problematic rates of exchange.”  The broker-dealer is accused of not probing possibly “problematic patterns” of VA exchanges and not enforcing written supervisory procedures related to consolidated reports. 

Sethi Petroleum Inc. and its founder Sameer P. Sethi are asking a federal judge to send the U.S. Securities and Exchange Commission’s fraud case against it to trial. Sethi Petroleum is based in Dallas, Texas.  The regulator had sought summary judgment in the Texas lawsuit, which accuses Sethi Petroleum and Sethi of fraudulently selling securities to investors for a drilling project in Montana and the Dakotas.  However, the two of them claim that a jury needs to decide whether the interests that investors are holding are even securities.

The Commission claims that Sethi raised over $4M in a little over a year for the oil venture with the promise of 20 gas and oil wells. 90 investors in nearly 30 states were promised 62.5% net working interest on these wells. They were purportedly told that wells were already making 1 million barrels/month, when Sethi Petroleum actually only held interests in just eight wells—and not all of them were being drilled—in which investors held only .15 to 2.5% interest. These wells produced far less than the 1 million barrels/month touted, claims the regulator. The actual figure was closer to 9,000 to almost 14,000 barrels/month.

The SEC claims that Sethi invested just $950K of investor funds in the wells, while he used $577K to pay himself and his dad. $1.1M of investor funds purportedly went to employees at Sethi Financial Group, with sales employees getting $1.04M. Seth  is accused of lying about his own record of regulatory and criminal violations and his company is accused of lying when it claimed that it was working with Hess Corp. and Mobil Corp.

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A sharp drop in the stock of SandRidge Energy Inc. (SDOC) has led to catastrophic losses of more than $7 billion for investors. Just last week, SandRidge Energy shares traded down at 3.8%, dropping to $0.0654. More than 2.3 million shares of the stock were exchanged. According to DailyPolitical, SandRidge Energy stock hit a 12-month high of $1.56; its low was $.03. This week, SandRidge Energy said it would not be able to file its quarterly results on time.

Unfortunately, brokerage firms and financial advisers may have recommended SandRidge Energy stock to investors as a safe proposition even for those seeking conservative, low risk investments. Instead, for some investors, the losses have been devastating.

SeekingAlpha.com reports that the Oklahoma-based oil and natural gas company is doing so poorly that it could file for Chapter 11 bankruptcy by early next month. According to Reuters, the company is talking to creditors about a possible debt restructuring deal. SandRidge reportedly wants creditors to agree on how debt could be lowered with the hope that this would restrict how much time it has to stay in court should it seek bankruptcy protection.

On December 31, the company had $3.6B in debt. Its market capitalization is $70B. It will owe interest on June 1.

Analyst Ratings Network reports that in a recent research note, Zacks Investment Research downgraded SandRidge Energy Inc. to a “sell” rating from a “hold” one. It was just last March that the company reported $.09 earnings/share for the quarter.

SandRidge Energy Stock Claims
Shepherd Smith Edwards and Kantas, LTD, LLP is investigating claims of investors who have lost money in an investment in SandRidge Energy stock that they bought at the recommendation of a financial advisor. Contact our oil and gas fraud law firm today.

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Texas Oil and Gas Ponzi Scam Leads to 13-Year Prison Term
The owner of RHM Exploration has been sentenced to over 13 years months behind bars for a Texas oil and gas Ponzi scam that raised about $4.5M from investors. William Risinger must pay more than $3.7M to those whom he bilked.

Risinger pleaded guilty to criminal charges of money laundering and wire fraud. From 11/10 to 6/14 he stole funds from investors for three gas, oil, and mineral ventures that were scams. Court documents state that he used proceeds from his fraud for his own spending and for ‘lulling” payments to make it appear to investors as if the joint venture they put their money into was running promised.

As part of his sentence, Risinger will spend 160 months in prison and serve three years of supervised release.

Linn Energy Seeks Chapter 11 Bankruptcy Protection
In other oil and gas news, Linn Energy LLC (LINE) has filed for Chapter 11 bankruptcy. The Houston-based company cited weak energy prices as a reason for having to seek protection.

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