DALLAS (CN) – The SEC has frozen the accounts of three Dallas businessmen, saying they ran a $485 million Ponzi scheme in securities for their alleged oil and gas company, Provident Royalties. Provident promised 18 percent annual returns and took money from more than 7,700 investors since 2006, according to the federal complaint.
Paul R. Melbye, Brendan Coughlin and Henry Harrison ran the scheme through 21 entities that sold the securities, the SEC says. The agency says the men spent less than half the money they took on the oil and gas leases, and eventually ran it as a Ponzi scheme, paying off old investors with new money.
“Provident sold ostensibly safe securities such as preferred stock to thousands of investors,” SEC spokesman Ken Israel said in a statement. “But it was actually operating a Ponzi-like shell game in which assets were shuttled from one entity to another and investors were paid ‘returns’ from whatever money was available – usually that of the most recent investors.”