The Securities and Exchange Commission has charged two Bowling Green, Kentucky-area men with defrauding investors in oil-and-gas securities offerings.
The SEC’s complaint, filed in federal court in Bowling Green, Kentucky, alleges that Scott Stacy Phelps and James Michael Harper raised approximately $611,000 by selling securities to nine investors between February 2015 and March 2016.
The SEC claims that although they told prospective investors that the investment proceeds would be used to drill for oil in Kentucky, the main goal of the offering was to enrich Phelps and Harper. According to the regulators, the pair allegedly spent “the vast majority of the investor funds on themselves and their families, paying themselves generous six-figure salaries, and using the investor funds for rent, vacations, consumer goods, dating and adult websites, entertainment, golf, and hotels.”
The SEC noted that they used a small amount to drill two wells, neither of which was commercially viable. Despite knowing this, the complaint alleges that defendants continued soliciting additional funds from investors, purportedly to drill for oil in both wells.
The SEC’s complaint charges Phelps and Harper with violating various sections of the Securities Act of 1933 and Securities Exchange Act of 1934. The SEC seeks permanent injunctions, disgorgement, prejudgment interest, and civil money penalties.