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Thursday, April 9, 2015

SEC FILES SUIT AGAINST COMPANY, OWNER ALLEGING FRAUD AGAINST INVESTORS THROUGH OIL AND GAS WELL DEALS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION  
Litigation Release No. 23231 / April 6, 2015
Securities and Exchange Commission v. GC Resources, LLC and Brian J. Polito, Civil Action No. 3:15-CV-0104-B, (NDTX, filed April 6, 2015)
SEC Charges Oil and Gas Company and Founder with Fraud

The Securities and Exchange Commission ("Commission") filed suit against GC Resources, LLC and Brian J. Polito in the United States District Court for the Northern District of Texas, Dallas Division, for defrauding investors through the sale of interests in oil and gas wells the company never owned.

The Commission alleges that GC Resources, through its owner and sole operator, Brian J. Polito, raised approximately $11.8 million by creating a fake agreement with a well-known oil company that purported to give GC Resources the right to sell interests in certain oil wells. Polito forged signatures on the false contract and used it to lure investors to purchase interests in the wells GC Resources claimed to own. Polito then used investor money for Ponzi-type payments back to investors and to purchase luxury cars, designer watches, and exotic vacations for himself.

The Commission's complaint charges both defendants with securities fraud under Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933. The complaint also alleges that Polito violated Section 15(a) of the Exchange Act by acting as an unregistered broker-dealer. The Commission's complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, and other relief against both of the defendants.

In a parallel action, the U.S. Attorney's Office for the Northern District of Texas, Dallas Division also filed criminal charges against Polito.

The SEC's investigation was conducted by Rebecca Fike and supervised by Jim Etri of the Fort Worth Regional Office. The litigation will be led by Jennifer Brandt. The Commission appreciates the assistance of the U.S. Attorney's Office in Dallas and the Federal Bureau of Investigation.

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