U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23394 / October 28, 2015
Securities and Exchange Commission v. Ascenergy LLC et al., Civil Action No. 2:15-cv-01974-GMN-PAL (D. Nev., October 13, 2015)
SEC Halts Fraudulent Oil and Gas Crowdfunding Scheme and Obtains Asset Freeze Over Joseph "Joey" Gabaldon and Ascenergy LLC
On October 13, 2015, the Securities and Exchange Commission (the "Commission") filed a civil action against defendants Las Vegas-based Ascenergy LLC and its CEO, Joseph "Joey" Gabaldon, of Southern California, for offering fraudulent oil and gas investments. At the Commission's request, the U.S. District Court for the District of Nevada has entered a temporary restraining order halting the offering, as well as an order freezing the defendants' assets and the assets of relief defendants Alanah Energy, LLC and Pyckl LLC.
The Commission's complaint alleges that, since at least 2014, defendants have engaged in a deceptive scheme on crowdfunding websites and the company's website to solicit investors to purchase overriding royalty interests in undeveloped oil and gas wells. According to the complaint, Ascenergy has raised approximately $5 million from approximately 90 investors. Ascenergy has already spent at least $1.2 million of the offering proceeds, but only a few thousand dollars appear to have been used for oil and gas-related expenses. Instead, the complaint alleges that a significant part of the $1.2 million has been spent on payments to Mr. Gabaldon or companies he controls, or for expenses unrelated to the oil and gas business. Further, immediately after the Commission subpoenaed Mr. Gabaldon, Ascenergy allegedly transferred $3.8 million — virtually all of the remaining offering proceeds — to Pyckl LLC, a San Jose, California company that has no apparent connection to the oil and gas business.
The Commission contends that Ascenergy has also made multiple, material misrepresentations about the company and the nature of the offering. Ascenergy allegedly falsely holds itself out as a credible energy company, and it presents the investment as a novel and extremely low-risk opportunity that will essentially guarantee investors out-sized returns. The Commission's complaint alleges that, in reality, Ascenergy is, at best, offering a high-risk investment in undeveloped and unproven conventional oil and gas wells.
The complaint alleges that defendants violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, civil penalties, and other ancillary relief against both defendants. The Commission further seeks the return of investor funds from the relief defendants.
The Commission's investigation was conducted by Keefe Bernstein and John Devine and supervised by Barbara Gunn of the SEC's Fort Worth Regional Office. David Reece and Keefe Bernstein will conduct the Commission's litigation.