U.S., German, British, Canadian Provincial Regulators Cooperate In Probe Of Alleged ‘Oil And Gas’ Fraud Scheme Operating In Florida, Texas And Aruba; SEC Sues Justin Solomon And Affiliated Firms
A Florida man selling “joint ventures” in oil-and-gas businesses in Texas to overseas clients through corporate arms in the United States and Aruba has been accused of fraud by the SEC.
Named defendants in the case were Justin Solomon of Deerfield Beach, Fla., and three affiliated companies: Seisma Oil Research LLC of Boca Raton, Fla., Seisma Energy Research AVV and Permian Asset Management AVV of Aruba.
Seisma Oil Research LLC also is known as Seisma Energy Research LLC, and Seisma Energy Research AVV also is known as Seisma Oil Research AVV, the SEC said.
The case is notable for reasons beyond fraud allegations and the number of companies with similar-sounding names. Indeed, the SEC said the agency was assisted in the probe by the Financial Services Authority of the United Kingdom, the Federal Financial Supervisory Authority of Germany, the Ontario Securities Commission and the Nova Scotia Securities Commission.
Also assisting internationally was the London Police Department. On the U.S. domestic front, the Division of Securities of the Florida Office of Financial Regulation also assisted.
The defendants have consented to a preliminary injunction and to repatriate “any remaining investor assets” to the United States.
Solomon and the companies raised “at least” $25 million in the scheme by using “high-pressure sales tactics” on “more than 400 non-U.S. investors,” drawing them into the scheme, the SEC said.
“The ventures were supposed to purchase undivided working interest in oil and gas projects owned and operated by two unrelated Texas companies,” the SEC said.
Investigators, though, said “Seisma never acquired any working interest for two of the six ventures and has expended only $9.5 million of the funds raised toward acquiring interests on behalf of the ventures.”
At the same time, the SEC said, “Seisma misrepresented or omitted material facts about the profitability and prospects of the oil and gas opportunities.”
Seisma Oil Research was on the list of unauthorised overseas firms operating in the UK since at least November 2009. The list on the FSA web site is here:
http://www.fsa.gov.uk/pages/Doing/Regulated/Law/Alerts/overseas.shtml
I’ve seen reports of some “investors” in Aussie-land so I’m surprised that ASIC is not involved as well.
Further research:
http://boards.fool.co.uk/Message.asp?mid=11056525&sort=postdate
From the SEC complaint:
“Solomon, Seisma Florida, Seisma Aruba, and Permian (collectively
“Defendantsâ€) employed high-pressure salesmen located in offshore boiler rooms to contact investors. In soliciting investors, the Defendants and their salesmen, at various times, made the following false and misleading statements, among others:
“(a) investors would receive a quick return of their investment; (b) the wells were already producing or would quickly begin production; (c) investors would receive monthly production payments of $10,000 to $15,000; (d) Credit Suisse, Exxon Mobil, and sovereign wealth funds were investing in the joint venture wells or were partnering with the well operators; (e) investors can sell their units for three or four times their purchase price; and (f) sales commissions were just 1% of the investment.
“Moreover, after the investors purchased the units, they were told that the only way they could sell their units was by purchasing shares of the Stock Exchange of the Caribbean (“SXCâ€), which purportedly would give them access to the exchange and allow them to sell their units . . .
“In reality: (a) investors never received the promised return on their investments (in fact, investors have received no returns); (b) Defendants did not acquire any working interest in the wells associated with two of the six ventures; (c) of the $25 million raised from investors, just $9.5 million (38%) was used to acquire working interests in oil and gas wells on behalf of the ventures, $10 million (40%) was used to pay commissions and marketing expenses, and the remaining $5.5 million (22%) was expended on boating, automobile and various expenses associated with running the scheme; (d) neither Credit Suisse, Exxon Mobil, nor sovereign
wealth funds invested/partnered in any of the wells; and . . .
“(e) the joint venture units could not be sold via the non-existent Stock Exchange of the Caribbean.”
Patrick
Hi Tony,
From the SEC complaint:
Seisma Oil Research, LLC (a/k/a Seisma Energy Research, LLC) is a Florida
limited liability company. Seisma Florida was incorporated in July 2007 and maintains an office in Boca Raton, Florida. Seisma Florida is the managing venturer for the six joint ventures.
“Seisma Florida has been ordered by the Saskatchewan Financial Services Commission to cease violating Saskatchewan securities laws.
“The Australian Securities and Investments Commission (‘ASIC’) has warned investors not to deal with Seisma Florida because it has made unsolicited
calls to Australians, does not hold a current license from ASIC, and may be running an investment scam.
“Siesma Florida has also been placed on a “warning list†by the United
Kingdom Financial Services Authority. The list includes firms that are engaged in “boiler room activities†and “pose a high degree of risk to consumers†. . .
“Seisma Energy Research, AVV (a/k/a/ Seisma Oil Research, AVV) is an Aruban
limited liability company. Seisma Aruba was incorporated in June 2009, when Seisma Florida supposedly relocated to Aruba.
“Seisma Aruba’s operations were run out of Boca Raton.
“Seisma Aruba has been ordered by the Saskatchewan Financial Services Commission to cease violating Saskatchewan securities laws. The Australian Securities and Investments Commission (“ASICâ€) has warned investors not to deal with Seisma Aruba because it has made unsolicited calls to Australians, does not hold a current license from ASIC, and may be running an investment scam.”
Patrick
Here is the entry on the cold calling blacklist:
http://www.fido.gov.au/fido/fido.nsf/byheadline/Cold-calling-blacklist-S?openDocument
Thank you Tony for posting the Australian Fido site.
Quite apart from their blacklist, the general advice on scams and how to spot them is excellent and worth a read for anyone who is not sure whether they are being invited into a real business or simply a ponzi or a pyramid.
Well worth a read.
http://www.fido.gov.au/fido/fido.nsf/byHeadline/Scams%20%26%20Swindlers%20portal
There were victims in 32 countries to most likely include the USA as well. There’s a more in depth story about this matter in the Lubbock Avalanche. It semi explains why this case was filed there.
What I find truly disgusting is the fact retired General Norman Swarzkopf once did a hype video for and with Hurst, TX based EnerMax (see item 13 of the complaint). The principal of this organization (Bret Boteler) is a recidivist securities fraudster (used to work for Kinlaw Securities and was charged with similar scams 15 years ago).
Also, retired USAF Colonel Robert Gaylord was an outside advisory board member for Seisma. Can’t West Point and US Air Force Academy grads do any due dilly? Apparently not.
Patrick, nice blogsite. Keep up the good work, sir.
Hi Vietnam Era Veteran,
As things stand, the SEC is alleging a fraud against “overseas” victims. If the SEC announces it has identified U.S. victims, I’ll make a separate post.
Thank you.
I’m not sure how Gen. Schwarzkopf vetted guests for his show. In general, producers do the vetting. It’s easy enough to become the subject of a TV or newspaper package that is flattering/semiflattering or used as part of package in which the interviewees are simply quoted on the subject at hand.
Mind you, I’m only speaking in generalities here, but story subjects often are not vetted by journalists to the degree a competent investment adviser would conduct due diligence. In general, there just aren’t budgets to do that type of vetting, perhaps especially for general stories.
Look at Scott Rothstein. He flew under the radar for a long time, but was constantly on the society pages of the newspapers. At a certain point, when too many adjectives contradicted too many nouns, a couple of the Florida papers devoted some resources to peel back layers of the Rothstein onion.
One way to view the content of TV shows and newspaper articles is as a snapshot of a particular moment in time. That snapshot will be replaced by a different snapshot or series of snapshots as time passes. The final snapshots of Rothstein were far different than the earlier ones.
EnerMax is listed as a “relevant entity” but is not a defendant in the SEC case against Solomon, Seisma and the others. But I do see the larger point you’re making about the TV show. If facts later emerge that paint an unflattering portrait of a TV guest or subject in a newspaper story, it can be embarrassing.
Quick note to readers:
This URL leads to a 2007 promo in which EnerMax promotes its appearance on a show hosted by Gen. Schwarzkopf.
http://www.enermaxinc.com/norman-schwarzkopfs-world-business-review-tv-series-features-enermax-inc/
Here is some info from the SEC on Bret Boteler:
http://www.sec.gov/litigation/litreleases/lr15610.txt
Patrick
My guess is US victims may have invested in EnerMax rather than Seisma as the BBB of Dallas lists a few complaints against EnerMax.
Appreciate you posting the link to General Schwartzkopf’s show and agree, he most likely doesn’t review who the scheduled guests are. Still not much of an excuse for retired USAF Colonel, Robert Gaylord, however (outside advisory board member).
After Kinlaw got shut down in Dallas, several of the principals moved their act to Colorado and were recently sued for running a Ponzi scam/boiler room O&G scam. One of the victims was a retired 82 year old school teacher. Another a former Wall Street lawyer with diminished capacity (early onset Alzheimers).
Thanks for updating this situation.
In April 2008 Enermax Inc. contacted me and introduced me to their joint ventures. I was not sure about investing but the saleperson by the name of Matt Wolcott made the prospect look promising and kept on calling, multiple times a day, and then finally I aggreed to invest in the smallest investment that was offered. It was 1/8 unit in their West Janice 1 venture. Wolcott claimed that the well would be drilled and I would get my monthly checks starting August 2008. However, it is now October 2010 and they kept on coming up with new things that needs to be done with the well.
I am really lost. This was my first investment experience and I cannot help but feel that I was scammed. I am not a wealthy person and all I wanted was to make a little extra income during the hard time for the future. Honestly, I really regret investing in Enermax Inc. In these 2 years worth of time I have many sleepless nights wondering what to do.
What should I do? Should I seek legal or federal justice? I am not looking to get rich by suing them and getting a large settlement. All I want is my money back from the regretable initial investment.
Someone please guide me.
Thank you.
Well I hope that you have all moved on and are recovering your losses. My thought is that with 11 banks outside USA being investigated for tax evasion and the first bank closing as a result. The German Deutsche bank and some untouched so far in south America may yield success for many frauds and they must be running scared. Justice will be done have no fear. either in this life or the next. I can wait but won’t let it ruin my life. Forgive and move on and pray that they will feel guilty and come clean. High hopes there Lol
J. S. and you have been warned !!!!! repay your depts and live without having to constantly look over your shoulder
where can i find justin solomon and his employees?
EnerMax down for the count now too, because of scam. Ran out of money trying to fund these wells. when
Sesima funding never showed up so they say. over extended other project funds to start wells. Lost all joint venture funds past and present in their joint ventures looks like