Tuesday, June 3, 2008
The SEC filed civil securities fraud charges against a number of defendants in federal district court in Kansas. The charges stem from an alleged massive securities offering fraud that has victimized over 1,300 investors from across the United States, as well as Canada and Puerto Rico. The complaint alleges that, between March 2004 and December 2007, the defendants raised approximately $156 million through the use of 22 purported oil-and-gas related equipment "joint ventures" structured to evade the securities laws. The defendants, according to the complaint, lured potential investors with, among other things, the false promise of annual returns of up to 40% from leasing and operating oil and gas equipment, and that the "joint ventures" would be rolled up into a single entity that would be the subject of an even more lucrative initial public offering (IPO) resulting in returns as high as 3-8 times their investment. However, the complaint alleges, the promised IPO and high annual returns have never come to fruition. On the contrary, the defendants have only returned approximately $7 million to investors over the four-year period of their fraudulent scheme, $1 million of which was diverted from other investors as Ponzi payments. Moreover, nearly half of the funds fraudulently raised were used to pay sales commissions and other "organizational" costs.
Without admitting or denying the allegations set forth in the complaint, all of the defendants except one have consented to the entry of an order permanently enjoining them from engaging in the violations set forth above.