The Securities and Exchange Commission (SEC) filed a civil action charging Matthew Griffin and William Griffin with fraudulently offering two Texas oil and gas partnerships – Payson Petroleum 3 Well 2014. The SEC alleges that between November 2013 and July 2014 the Griffins conducted a fraudulent offering of interests raising $23 million from approximately 150 investors for the purpose of developing three oil and gas wells. The SEC claims that the Griffins misled investors about Payson’s promised participation in the program and other aspects of Payson’s compensation as the program’s sponsor and operator.
According to the SEC, the Griffins authorized offering materials containing numerous misrepresentations and omissions including: i) that Payson would contribute an up-front 20% of the offering amount in the amount of $5.4 million and that this capital infusion would cover 20% of the cost of the wells; ii) that Payson’s consideration as program sponsor/operator/co-investor would be limited to 20% of any petroleum revenue generated by the wells; and iii) that Payson would cover any cost overages beyond the estimated $24 million.
The SEC found these representations to be false because Payson contributed no money to the offering and paid nothing toward the well costs and moreover Payson lacked the financial means to pay even the smallest cost overage. The program later declared bankruptcy.
Payson Petroleum has raised tens of millions dollars through private placements including:
- Payson Petroleum, Inc.;
- Payson Petroleum Jenny #1, L.P.;
- Payson Petroleum J.C. #1, LP;
- Payson Petroleum Grayson 2 Well, LP;
- Payson Petroleum Crowe 1, LP;
- Payson North Texas Multi-Well I, LP;
- Payson Petroleum Brown No. 1 L.P.;
- Payson Petroleum 3 Well, LP;
- Payson Petroleum 3 Well 2014, LP;
- Payson Developmental Drilling Fund 2014 II, LP;
- Payson Drilling Fund 2015 I, LP; and
- Payson Drilling Fund 2015 II, LP.
Before recommending investments in oil and gas and commodities related investments, brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. Oil and gas and commodities related investments have been recommended by brokers under the assumption that commodities prices would continue to go up. However, brokers who sell oil and gas and commodities products are obligated to understand the risks of these investments and convey them to clients.
At Gana LLP, our attorneys are experienced representing investors who have suffered securities losses due to inappropriate investments in oil and gas related securities. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.