Guilty Plea in $5.8 Million Ponzi Scam

FORT WORTH (CN) - A Texas man pleaded guilty Wednesday to wire fraud in a $5.8 million oil and gas Ponzi scheme that defrauded at least 45 investors.
     Jeffrey Watts, 41, of Fort Worth, pleaded guilty to a criminal information filed on July 8 that charged him with one court of wire fraud, the U.S. Attorney's Office said. Watts faces up to 20 years in federal prison, a $250,000 fine and restitution.
     Prosecutors said the scheme ran from late 2011 to December 2013, with Watts as founder and principal of Blue Alpha Energy. They said he "falsely representing to investors that the company had invested in oil and gas well in Texas and was owned and/or operated by Arrowhead Productions, a legitimate, but unrelated company based in Fort Worth."
     Watts purportedly led investors to believe they were investing in Arrowhead Productions' oil and gas wells, showing them documents that bore the signature of the actual president of Arrowhead Productions.
     "Watts falsely portrayed these sham entities as legitimate, third party lenders or investors in his alleged oil and gas interests, and he transferred investor funds between these accounts and the accounts of Blue Alpha Energy," according to the U.S. attorney's statement.
     "Watts falsely represented to investors that they would receive monthly distributions according to their ownership percentage in oil and gas wells owned and/or operated by Arrowhead Productions. He also duped his business partners and employees into believing his fraudulent representations, causing them to disseminate printed investment information that conveyed his misrepresentations."
     Prosecutors said that to keep the scheme going, Watts made monthly payments to investors in Blue Alpha Energy, using investor money transferred from the sham entities he controlled.
     The scheme unraveled in December 2013 when Blue Alpha Energy investors learned Watts never had investment agreements with Arrowhead Productions.
     Watts is to be sentenced on Dec. 9.