Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, March 24, 2009

SEC Freezes Assets in Alleged Oil and Gas Scam

The SEC charged a Los Angeles man and two of his companies with securities fraud and obtained an emergency court order to freeze their assets and halt an alleged ongoing oil and gas investment scheme they have been operating out of a boiler room in Los Angeles.

According to the SEC’s complaint, Clement Ejedawe, a/k/a Clement Chad and his companies, Innova Energy LLC and Innova Leasing and Management, raised at least $1.3 million from over 30 investors by promising guaranteed returns on working interests in oil and gas leases or oil and gas drilling equipment. In fact, according to the SEC’s complaint, the defendants did not use investor funds for the oil and gas business but rather to pay Ejedawe’s personal expenses.  According to the complaint, Ejedawe is the subject of at least seven separate cease-and-desist or desist-and refrain orders relating to his unregistered offerings of securities, including orders from California, Alabama, Pennsylvania, Maryland, Kansas, and Washington. Defendants both misrepresented and failed to disclose these state orders to prospective investors.

The SEC obtained an order (1) freezing the assets of Innova Energy, Innova Leasing and Management, and Ejedawe; (2) requiring accountings; (3) prohibiting the destruction of documents; and (4) granting expedited discovery; and (5) temporarily enjoining the Innova entities and Ejedawe from future 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 and Rule 10b-5 thereunder. A hearing on whether a preliminary injunction should be issued against the defendants is scheduled for April 6, 2009. The SEC also seeks permanent injunctions, disgorgement, and civil penalties against Ejedawe and the Innova entities.

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