SEC Charges Southlake Resources in Oil-And-Gas Scheme
Oct. 25, 2016
A Texas company and its president have agreed to pay over $5.4 million to settle charges by the Securities and Exchange Commission that they orchestrated an oil-and-gas fraud. The SEC also charged the president and a company vice president with acting as unregistered brokers in the transactions underlying the fraud.
According to the SEC's complaint, Southlake Resources Group, LLC and its founder and president, Cody M. Winters, raised approximately $5.2 million from more than 70 investors in 12 fraudulent oil-and-gas joint ventures. Winters and Southlake employed sales agents, including vice president Nicholas R. Hamilton, to offer and sell joint-venture interests to investors in 26 states from approximately June 2010 through September 2014.
The SEC alleges that Winters and Southlake provided investors with offering documents that contained untrue and misleading statements about the investments. For example, the documents misrepresented the use of the offering proceeds, contained unsubstantiated projections regarding future oil production and revenue, and overstated expected well costs, according to the complaint. The SEC also alleges that Winters directed Southlake to engage in conduct that operated as a fraud on investors, including taking undisclosed profit and overhead payments from the offering proceeds, using offering proceeds to acquire working interests for itself, and selling joint-venture interests to certain investors at an undisclosed 50% discount. All three defendants have agreed to settle the SEC's charges without admitting or denying the allegations in the complaint.
The SEC's investigation was conducted by Jennifer R. Turner and Ty S. Martinez with assistance from Timothy S. McCole, and was supervised by Jonathan P. Scott and David L. Peavler, all of the SEC's Fort Worth office. More information is available here.