New York,: An Indian-American businessman has been sued by US federal regulators for offering fraudulent oil and gas investments in a petroleum joint venture he owned, raising about USD four million through the scheme. Sameer Praveen Sethi and his firm Sethi Petroleum face an emergency civil action filed by the Securities and Exchange Commission (SEC).
At the Commission’s request, the US District Court for the Eastern District of Texas has entered a temporary restraining order halting the offering, as well as orders to freeze his assets. The complaint alleges that, since January 2014, Sethi and his firm, where he is president, raised approximately four million million dollar through the fraudulent offer and sale of securities in the Sethi-North Dakota Drilling Fund-LVIII Joint Venture.
The offering materials represented that 70 per cent 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 Sethi and his firm spent less than 25 per cent for these purposes.
Instead, he spent a majority of the investor funds on undisclosed and unapproved expenditures such as diverting USD 1.6 million to himself and his family, and Sethi Petroleum’s parent company and over a million dollars to sales employees. Less than USD one million of the funds raised went to NDDF’s actual oil and gas operations. The Commission also contends that the firm made numerous other misrepresentations and omissions to the venture’s investors.
He and his firm falsely claimed to have “partnered directly with” large public oil and gas companies like ConocoPhillips and Continental Resources 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 it had relationships with these companies as well. The Commission further alleges that Sethi and his firm misled investors about the number of wells in which the joint venture actually held interests; the operating status of those wells and the returns investors could expect from those properties.
The defendants also failed adequately to disclose prior enforcement actions taken against them and their affiliates by state securities regulators, and Sethi’s prior criminal conviction and incarceration. The Commission seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, prejudgement interest and civil penalties against the defendants.
