Sethi Petroleum, LLC and Sameer Praveen Sethi – Fraudulent Oil and Gas Scheme – South Florida Commercial Litigation Attorney

Sethi Petroleum, LLC and Sameer Praveen Sethi – Fraudulent Oil and Gas Scheme – South Florida, including Boca Raton, Fort Lauderdale and West Palm Beach, Commercial Litigation Attorney

Securities and Exchange Commission v. Sethi Petroleum, LLC and Sameer Sethi, Civil Action No. 4:15-CV-338 (E.D. Tex.)

SEC Halts Fraudulent Oil and Gas Scheme and Obtains Asset Freeze and Appointment of a Receiver Over Sameer Sethi and Sethi Petroleum, LLC

On May 14, 2015, the Securities and Exchange Commission filed an emergency civil action against Sethi Petroleum, LLC and its president, Sameer Praveen Sethi, for offering fraudulent oil and gas investments. At the Commission’s request, the U.S. District Court for the Eastern District of Texas has entered a temporary restraining order halting the offering, as well as orders appointing a receiver over, and freezing, the defendants’ assets.

The Commission’s complaint alleges that, since at least January 2014, defendants have raised approximately $4 million through the fraudulent offer and sale of securities in the Sethi-North Dakota Drilling Fund-LVIII Joint Venture (“NDDF”). According to the complaint, defendants’ offering materials represented that 70% of investor funds would be used to acquire working interests in and drill and complete 20 oil and gas wells in the Bakken Shale formation in North Dakota. But the Commission alleges that defendants spent less than 25% for these purposes. Instead, defendants spent more than 75% of investor funds on undisclosed and unapproved expenditures such as diverting $1.6 million to Sameer Sethi, his family, and Sethi Petroleum’s parent company and over $1 million to sales employees. Less than $1 million of the funds raised went to NDDF’s actual oil and gas operations.

The Commission also contends that defendants made numerous other misrepresentations and omissions to NDDF investors. For instance, defendants falsely claimed to have “partnered directly with” large public oil and gas companies like ConocoPhillips and Continental Resources, Inc. to develop oil and gas properties, and Sethi Petroleum’s website featured corporate logos for other well-known companies like Exxon Mobil and Hess Corporation, falsely suggesting that defendants had relationships with these companies as well. The Commission further alleges that defendants misled investors about the number of wells in which NDDF actually held interests; the operating status of those wells; and the returns investors could expect from those properties. Defendants also failed adequately to disclose prior enforcement actions taken against them and their affiliates by state securities regulators, and Sameer Sethi’s prior criminal conviction and incarceration.

The complaint alleges that both defendants violated Section 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and that Sameer Sethi also violated Exchange Act Section 20(b) and is liable under Exchange Act Section 20(a) as a control person for Sethi Petroleum’s violations. The Commission seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, prejudgment interest, and civil penalties against both defendants.

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