DALLAS (CN) – A Dallas man was sentenced Thursday to 20 years in federal prison for his role in massive, $7 million oil and gas Ponzi scheme.
Alan Todd May, 46, was sentenced by U.S. District Judge Jane Boyle to the maximum allowable sentence under federal law. He pleaded guilty in December 2010 to one county of mail fraud, admitting that he raised $7 million from investors through false pretenses.
Under the terms of his plea agreement with prosecutors, a second mail fraud count and a wire fraud count were dismissed.
May has been in custody since his arrest in June 2010 in San Francisco on a related federal criminal complaint. He was founder and president of Prosper Oil & Gas, Inc., which purported to own and operate oil and gas leases in several states, including Texas, Oklahoma, Colorado and Arkansas.
According to plea documents, May ran a Ponzi scheme from July 2008 to March 2010 that he raised the money from investors to purchase royalty interests in oil and gas leases.
“May and others told investors that the royalty interests for sale had yielded, or would yield, annual returns greater than 25 percent,” prosecutors said in a written statement. “As a result of these representations, Prosper sold purported royalty interests to more than 170 investors.”
Prosecutors say May and others were selling mineral interests that Prosper did not own, were overselling mineral interests that Prosper did own, were wildly overstating the production revenue for Prosper’s leases and were making Ponzi payments, disguised as “royalty” payments, to investors.
In addition, May admitted using investor funds for “extravagant” personal expenses and for payments to his mother, daughter, brother and ex-wife.
The Securities and Exchange Commission opened a separate investigation into May and Prosper Oil and Gas, and filed a civil complaint in March 2010 against them, alleging they raised at least $6 million from at least 99 investors throughout the country in fraudulent fractional, undivided royalty interests in oil and gas properties.
This resulted in U.S. District Judge Sam A. Lindsay ordered the company and May’s assets be placed in receivership. Six accounts were identified that Prosper used to receive investor funds, receive oil and gas revenues, and make payouts to investors.
The accounts revealed approximately $6.7 million in total incoming investor funds, approximately $441,000 of total oil and gas revenue and approximately $1.2 million of investor distributions.