SEC Charges Four in Connection with Fraudulent Oil and Gas Offering
Litigation Release No. 25296 / December 27, 2021
Securities and Exchange Commission v. Timothy Burroughs, Jay Holstine, John Griffin, and Michael Oswald Williams, No. 4:21-CV-00994 (E.D. Tex. filed December 27, 2021)
The Securities and Exchange Commission charged Timothy Burroughs, Jay Holstine, John Griffin, and Michael Oswald Williams for their respective roles in raising approximately $3.2 million from approximately 50 investors through the fraudulent and unregistered offer and sale of interests in two oil and gas joint ventures offered by Petrobridge Energy, LLC.
According to the SEC's complaint, between February 2016 and March 2017, Burroughs lured investors with false promises of inflated investment returns while concealing his extensive disciplinary history of violating state securities laws. The SEC alleges that Burroughs installed Holstine - who lacked prior oil and gas operations experience - as Petrobridge's public face after a prospective investor posted information on a consumer fraud website about Burroughs's disciplinary history. As alleged, Burroughs and Holstine then revised corporate records relating to Petrobridge's ownership and operation to remove references to Burroughs's involvement. The SEC contends, however, that Burroughs continued to control Petrobridge's day-to-day operations. In this capacity, Burroughs prepared offering materials that allegedly misrepresented material aspects of the investment, such as overstating the acreage that Petrobridge had under lease and falsely promising investment returns as high as 59% that failed to account for operating expenses. Finally, the complaint alleges that Burroughs and Holstine recruited Griffin and Williams to sell the offerings, primarily through nationwide cold calling campaigns.
The SEC's complaint alleges that Burroughs violated the antifraud provisions 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 that Holstine violated Sections 17(a)(2) and (3) of the Securities Act. The SEC also alleges that Williams and Griffin acted as unregistered brokers in violation of Section 15(a) of the Exchange Act.
Without admitting or denying the allegations in the complaint, Holstine, Griffin, and Williams have agreed to settle the Commission's charges by consenting to the entry of final judgments that permanently enjoin them from committing future violations of the charged provisions, and that order: Holstine to pay $335,219.67 in disgorgement plus prejudgment interest and an $85,000 civil penalty; Williams to pay $284,860.76 in disgorgement plus prejudgment interest and a $50,000 civil penalty; and Griffin to pay $150,469.84 in disgorgement plus prejudgment interest and a $50,000 civil penalty. Williams and Griffin have also agreed to the issuance of certain securities industry and penny stock bars in related follow-on administrative proceedings. The settlements are subject to court approval.
In its case against Burroughs, which will be litigated, the SEC seeks permanent injunctions, disgorgement plus prejudgment interest, a civil penalty, and a bar from serving as an officer or director of a public company.
Kimberly Cain and Ty Martinez conducted the SEC's investigation under the supervision of David Reece and Eric Werner. Jason Reinsch will lead the litigation under the supervision of B. David Fraser.