U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23809 / April 19, 2017
Securities and Exchange Commission v. Matthew W. Fox and Wayne Energy, LLC, No. 4:17-cv-271 (E.D. Tex.)
SEC: Oil & Gas Promoter Misappropriated Investor Funds
The Securities and Exchange Commission today charged Matthew W. Fox of Plano, Texas and his company, Wayne Energy, LLC, with securities fraud arising from a failed offering of interests in a joint venture formed to rework and recomplete an oil and gas well in Upshur County, Texas.
The SEC's complaint, filed in federal district court in Sherman, Texas, alleges that Fox raised approximately $950,000 for this joint venture between March 2015 and October 2016. The complaint alleges that Fox had previously operated another oil and gas company - Frisco Exploration Company - but formed Wayne Energy in March 2015, after Frisco Exploration failed. Wayne Energy was to be the manager of the joint venture. The SEC further alleges that, to raise funds for the joint venture, Fox simply recycled offering documents he had used at Frisco Exploration. But, according to the SEC's complaint, other than occasionally changing the names of the entities, Fox did not customize the offering documents to the joint venture's business or risks. And, according to the SEC, these offering documents falsely stated that Wayne Energy would not commingle its funds with those of the joint venture, and that Wayne Energy was an operator licensed with the Texas Railroad Commission, neither of which statements was true.
In addition, the SEC alleges that Fox misappropriated most of the funds raised from investors. Rather than use these funds for the Upshur County well, the complaint alleges that Fox spent approximately $500,000 of investor money on personal expenses, including more than $236,000 in casino gambling charges and cash withdrawals and approximately $240,000 on house and car payments, vacations, dining and shopping, and jewelry.
Without admitting or denying the allegations in the SEC's complaint, Fox and Wayne Energy have agreed to a settlement that permanently enjoins them from future violations of 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, and requires them to pay disgorgement and prejudgment interest and civil penalties in amounts to be determined by the court upon the SEC's motion. In addition, Fox has agreed to a preliminary conduct-based injunction prohibiting him or entities he controls, including Wayne Energy, from issuing or selling securities. The settlement is subject to court approval.
The SEC's investigation was conducted by Sarah S. Mallett and supervised by James E. Etri and David L. Peavler of the Fort Worth Regional Office. Christopher A. Davis will lead the litigation.