LAS VEGAS (CN) - A federal judge ordered a California man to stop using crowd funding to defraud investors in his so-called oil and gas company, Ascenergy, in what the SEC calls a $5 million fraud.
U.S. District Judge Gloria M. Navarro on Thursday granted the SEC request for a preliminary injunction against Joseph Gabaldon and Ascenergy, and ordered them to stop using false information and fraudulent means to gain more investors.
Navarro wrote that the SEC "has demonstrated the likelihood of the dissipation of investor assets and the likely inability to recover investor funds if relief is not granted."
It also demonstrated a probability of success on the merits of the lawsuit and likelihood of irreparable injury, Navarro said.
In a lawsuit filed under seal on Oct. 13, the SEC accused Gabaldon and Ascenergy of two counts of securities fraud . It filed a third count against relief defendants Pyckl LLC and Alanah Energy LLC.
The SEC said emergency action was needed "to stop an ongoing securities offering fraud by Ascenergy, which purports to be an oil and gas company, and its CEO Joseph aka 'Joey' Gabaldon."
Neither Ascenergy nor its securities were ever registered with the SEC, nor was Gabaldon. Gabaldon is the CEO of Ascenergy, which he controls and owns "some or all of" through Alanah, according to the complaint. Ascenergy has no physical location and does all of its business online. Gabaldon is believed to live in Southern California.
"Ascenergy falsely holds itself out as a credible energy company, and it presents the investment as a novel and extremely low-risk opportunity that will essentially guarantee investors outsized returns. In reality, Ascenergy is, at best, offering a high-risk investment in undeveloped and unproven conventional oil and gas wells," the SEC said.
The novel aspect of the alleged fraud is not the "outsized" claims about oil and gas, but using crowd funding.
Ascenergy says on its website: "We have successfully completed our initial financing round and are entering the phase of our business by putting your investment capital to work: Leasing and drilling in the next couple months to begin providing your monthly returns in the first quarter of 2016."
Ascenergy raised about $5 million from about 90 investors in the United States and overseas, and spent $1.2 million of it, but "only a few thousand dollars appear to have been used for oil and gas-related expenses," the SEC said.
Much of the $1.2 million went to Gabaldon and his companies for expenses unrelated to the oil and gas business, including foreign travel, dining at restaurants, Apple store and iTunes purchases, dietary supplements, and personal care products, the SEC said.
When the SEC subpoenaed Gabaldon and Ascenergy employees, they shut down the shop.
"Immediately after the commission's staff subpoenaed Gabaldon and other company employees, Ascenergy shut down public access to its website and transferred $3.8 million - virtually all of the reaming offering proceeds - to Pyckl LLC, a San Jose, California, company that has no apparent connection to the oil and gas business," according to the complaint.
Pyckl and its securities never were registered with the SEC in any capacity.
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