SEC Sues Texas Oil and Gas Promoters for Securities Fraud
On June 28, 2013, the Securities and Exchange Commission charged Matthew Madison and Dwight McGhee, and their Irving, Texas based company Infinity Exploration, LLC, with conducting a fraudulent offering of oil and gas related investments.
Filed in the United States District Court for the Northern District of Texas, the Commission's complaint alleges that, between March and October 2008, Madison and McGhee raised over $2 million from at least 40 investors from the fraudulent offer and sale of interests in Infinity's two oil and gas joint ventures. Infinity's offering materials misled investors into believing that Infinity's ventures would own the leases and control drilling operations. Indeed, Infinity's communications with investors were peppered with references to as "our wells" and "our crew." The Commission alleges that these claims were false, because Infinity's ventures did not actually have direct interests in any oil and gas leases and no direct involvement in operation of any leases. To the contrary, Infinity's ventures merely owned interests in an unaffiliated joint venture, over which Infinity's ventures could exercise no significant control. The complaint alleges that Madison and McGhee intentionally hid this fact from investors. The complaint further alleges that the defendants' offering materials falsely described Madison as experienced and successful in the oil and gas industry and failed to disclose McGhee's 2007 federal felony conviction.
The complaint alleges that Infinity, Madison, McGhee violated Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and civil penalties against each of the defendants.
The SEC's investigation was conducted by Ronda Blair, Ty Martinez, and Barbara Gunn of SEC's Fort Worth Regional Office. The SEC acknowledges the assistance of the Federal Bureau of Investigation.
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