SEC: Oil-And-Gas Scammer Paid Belize Company For Ad That Ran On CNBC, Fox Business News; Offer Proved To Be Fraudulent; Jon C. Ginder Charged In Emergency Action

A Texas man paid a Belize company to produce ads that ran on CNBC and Fox Business News for his oil-and-gas venture, but the offer proved to be fraudulent and the SEC has filed an emergency court action to stop the scheme, the agency said.

Jon C. Grinder of Houston used “at least” $210,000 of investor funds to pay the offshore firm to launch the TV ads, which claimed investors could earn annual returns of up to 40 percent from “low risk producing wells.”

Ginder personally called prospects who responded to the ads. The SEC described the scheme as multilayered, saying Ginder “fraudulently raised approximately $3.5 million from over 50 investors nationwide through three unregistered oil and gas limited partnership offerings.”

Investors were told their money would be used to purchases leases and renovate existing wells to enhance production, amid claims that “historical oil and gas data” suggested production would surge once the properties were improved.

The SEC described the claims as “wildly optimistic” and “fraudulent on their face” because “the historical oil and gas production from the partnership leases was very poor” and “many of the wells had no recent production history.”

In one of the offerings, annual production was estimated at 91,000 barrels even though the wells had produced a total of only 67,000 barrels in the preceding 15 years.

“There were no reserve reports or any other credible basis upon which he could form a reasonable belief that the wells could be reworked to yield a production rate in a single year that would exceed over 135 percent of the prior combined 15 years[‘] worth of productivity,” the SEC said.

During the first year of the venture (2008), total production after several wells “purportedly” were reworked topped out at only about 3,522 barrels — a far cry from the projection of 91,000 barrels, the SEC said.

In 2009, the agency said, production topped out at about 3,986 barrels.

Ginder continued to raise funds based on the same “false and misleading” projections through March 2010, while also failing to disclose the venture was operating at a loss, the SEC said.

But production misrepresentations were only part of the scheme, the SEC said.

Ginder, according to the agency, also used investor funds to provide an unauthorized, interest-free loan of $300,000 to a penny-stock company “founded by his friend and in which Ginder owned stock.”

The penny-stock firm “failed to repay the loan,” the SEC said.

Ginder also did not disclose that $800,000 in investor funds were used to purchase leases from a private company he controlled, netting him a cash profit of $700,000 and 10 “partnership units” worth $60,000 each, the agency charged.

All in all, Ginder netted $1.3 million from self-dealing, the SEC alleged.

The SEC has asked a federal judge to freeze Ginder’s assets, along with the assets of two related companies: Northamerican Energy Group Inc. (NEG) and Northamerican Energy Group Corp. (NEGC). The agency alleged that the scheme operated between February 2008 and May 2010.

Read the SEC complaint.