Boiler Room Took $25 Million, SEC Says

(CN) - Operating from boiler rooms in Thailand and Costa Rica, a Florida man bilked people of $25 million by selling bogus shares in Texas oil wells, the SEC claims in Lubbock Federal Court. Justin Solomon, of Deerfield Beach, also sold shares in the nonexistent Caribbean Stock Exchange, the SEC says.

Solomon and his crew promised profits of $10,000 a month from his Seisma Energy and Permian Asset Management companies, but he didn't even own an interest in some of the wells he sold, the SEC says.

The SEC says Solomon sold shares in six oil wells to more than 400 foreign investors, though he didn't own a working interest in two of the wells and investors have yet to receive any returns.

Solomon's "high-pressure salesmen" promised that commissions were just 1 percent, while in reality "a whopping $10 million (40 percent of total funds raised) was used to pay commissions and marketing expenses," the SEC says. (Parentheses as in complaint.)

Solomon, 32, has raised $25 million since 2007, but "just $9.5 million (38 percent) was used to acquire working interests in oil and gas wells on behalf of the ventures ... and the remaining $5.5 million (22 percent) was expended on boating, automobile and various expenses associated with running the scheme," according to the complaint. (Parentheses as in complaint.)

Financial regulators in Australia and the United Kingdom have posted warnings about Solomon, who has refused to testify, according to the complaint.

The SEC says that Solomon's offshore sales force, which claimed to be calling from Florida, falsely promised that "investors would receive a quick return of their investment; the wells were already producing or would quickly begin production; investors would receive monthly production payments of $10,000 to $15,000; Credit Suisse, Exxon Mobil, and sovereign wealth funds were investing in the joint venture wells or were partnering with the well operators; [and] investors [could] sell their units for three or four times their purchase price."

But investors never received any returns, the companies did not acquire any working interest in wells associated with two of the six ventures and neither ExxonMobil nor any other company invested or partnered in any of the wells, according to the SEC.

Solomon and his crew set up websites and produced infomercials to push the oil wells, and also offered shares in "The Caribbean Stock Exchange," telling suckers that that "stock ownership would provide access to an exchange on which they could sell their otherwise illiquid joint venture units," the SEC says.

It adds that the Caribbean Stock Exchange "is not, and never has been, an operating exchange."

The SEC wants Solomon, Seisma Oil Research, Seisma Energy Research and Permian Asset Management enjoined from continuing to violate the Securities and Exchange Acts. It also seeks disgorgement, damages and penalties.

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