The head of a petroleum company was found guilty of selling securities in violation of federal law after a Texas court ruled that the executive lied to investors about the company’s relationship with major oil producers.
The Securities & Exchange Commission (SEC) was awarded summary judgment on its claims of securities fraud against Sameer Sethi after the agency provided enough evidence to establish that 1.) the investment at issue here was a security investment; and, 2.) the company mischaracterized its relationships with major oil and gas companies in order to lure investors to the project.
Through sales calls, Sethi advertised that Sethi Petroleum worked with a number of major players in the petroleum industry, and made similar statements in the press and on social media.
As a result, the court found that “each of these statements would lead a reasonable investor to believe that Sethi Petroleum had present relationships with major gas and oil companies at the time that the statements were made…(but) only had interests with Irish Oil & Gas, Inc., a small, private oil company.”
Sethi was unable to dispute that his claims had some basis in fact, and that they did not create a danger of misleading investors as a result. Sethi raised more than $4 million from investors to fund a program that promised 20 oil and gas wells, but channeled that money to paying himself and his employees.
He also lied about progress of wells under construction as well as his history of criminal and regulatory violations. 90 investors were promised a 62.5% net working interest on the wells and were told that company-owned wells were producing 1 million barrels of oil per month. In fact, Sethi Petroleum wells were only producing between 9,000 and 14,000 barrels per month, while investors retained only .15 to 2.5% ownership of said wells.
Of the $4 million raised, less than $1 million was invested in the wells, while Sethi and his father pocketed $577,000, other employees received $1.1 million and sales employees another $1.04 million. Sethi also failed to disclose to investors that the company was facing litigation to rescind the purchase of wells it already owned.
Call a Los Angeles Securities Fraud Attorney Today
If you invested with Sethi Petroleum or suffered a loss after finding out you were misled, you may have certain legal rights that require your immediate attention.
Contact an experienced Los Angeles securities fraud attorney today for a consultation to discuss your rights and options.