Luxury cars

Texas Oil Ponzi Schemes Reportedly Funding Private Jets, Luxury Cars, and Marriage on the Queen Mary

A wedding on a cruise ship, investments in the jade industry in Guatemala and a private jet: these are just a few of the things investors who thought they would get rich in the oil industry paid to the square. Two Securities and Exchange Commission lawsuits filed last month against Ponzi scammers selling fraudulent investments in America’s largest oilfield show how much of the American oil and gas boom is like the Wild West.

The first one DRY suit, filed in December and made public this week, is an absolute rat’s nest made up of dozens of LLCs, debt funds and other details of the Texas Permian Basin drift. A company called Heartland Group Ventures, formed in 2018, began raising funds from investors for direct interests in two Permian wells that the company said produced 200 barrels of oil and gas per day. The company operating the wells, Heartland told investors, was owned by a man named Manjit “Roger” Sahota, who Heartland said founded his companies in 2003 and had years of experience in the industry.

What is remarkable about this matter is that a lot of this information is quite easy to verify. The lawsuit said Heartland owners did not bother to research the allegedly super-productive wells they were selling to investors on the Texas Railroad Commission website, which allegedly showed them that none of the wells hadn’t been finished or produced barrels of anything. , not to mention the oil. They also did not review the files of the Texas Secretary of State, which showed that Sahota’s companies were in fact founded in 2017. But then two of Heartland’s four directors – all four of whom are also named as defendants. in the trial – were not exactly tankers. ; the SEC affair usefully notes that the two founders never “have experience in managing an oil and gas company”.

None of this seemed to matter. Over the next three years, according to the lawsuit, Heartland continued to raise millions of dollars from investors in various funds, apparently for stocks in various Permian super-productive wells (none of which were actually very productive. at all). The defendants used much of this money to allegedly pay other investors to maintain the program. But the lawsuit revealed that Heartland also funneled $ 54 million ($ 74 million) to Sahota, who in turn used his new money to buy a private jet, helicopter and real estate in the Bahamas. The lawsuit also notes that one of the founders of Heartland funneled nearly US $ 500,000 ($ 687,850) in investor funds for jade investments in Guatemala, where he owed money to other people. of a failed jade investment years before, and donated a good US $ 11 ($ 15) million to a separate LLC he controlled.

Remarkably, according to the lawsuit, the owners of Heartland apparently continued to do no due diligence with their business partner or to verify public information about oil and gas production from one of the wells themselves, even though Sahota refused to share copies of invoices or information. on the wells. In fact, the wells generated less than US $ 500,000 ($ 687,850) in revenue.

Just over a week after the Heartland complaint was filed, the SEC turned its attention to another one Ponzi scheme in the Permian. the combination, filed Dec. 15 against Marco “Sully” Perez and his company, says Perez raised more than $ 9 million ($ 12) from more than 265 investors for a company he said supplied sand used in the construction industry. hydraulic fracturing process. But unlike the guys at Heartland, who exaggerated the production of real oil and gas wells, Perez, according to the lawsuit, didn’t even have a company; he had never worked with the companies he claimed to be clients.

Either way, Perez has targeted investors – including “military and veterans,” the lawsuit says – focusing on his supposedly self-taught experience and history in the military, providing give people a website where they could easily “invest” with a credit card or bank transfer. The site also prompted investors to leave positive reviews about its “business” on the Better Business Bureau’s website. He then spent the money he raised by paying other investors to, once again, maintain the program as well as what the lawsuit calls his “extravagant way of life.” Among the finer things in life, the lawsuit says Perez used investor funds for “luxury cars, a helicopter, private jet travel, and jewelry.” The costume also notes that he used the money for casino expenses and to fund his wedding on the Queen Mary.

These cases show how economic activity in the Permian is akin to a modern-day gold rush, filled with dozens of small businesses genuinely trying to strike – and plenty of room for crooks to spawn. a path. The amount of money flowing into the Texas oil fields and the resulting oil and gas boom actually helped drive down the price of oil; investors are increasingly demanding that producers reduce their production and focus on returns for shareholders to try to get some of their money back. And the fact that America’s fracking boom in the region has been driven by so many small players, backed by so much free and seemingly unchallenged money, has worrying implications for pollution regulation.