LAS VEGAS (CN) - A Southern Californian used crowd funding to find victims for a $5 million oil and gas scheme, the SEC said in an unsealed federal complaint.
The SEC lawsuit, filed under seal on Oct. 13, accuses Joseph Gabaldon and his company Ascenergy of two counts of securities fraud. A third count for equitable relief is 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 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 says.
The novel aspect of the alleged fraud is not the "outsized" claims about oil and gas, but using crowd funding.
Ascenergy claims seek oil and natural gas "focused on conventional drilling in sandstone formations" and "solicits investors on crowd funding websites and its own website to purchase overriding royalty interests in undeveloped oil and gas wells," according to the SEC.
Ascenergy says on its website, checked Thursday morning: "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 says its initial offering has closed but investors can complete and submit a "pre-qualification form" to get news of more investment opportunities.
The SEC says Ascenergy has raised about $5 million from about 90 investors in the United States and overseas, and has spent $1.2 million of it, "only a few thousand dollars appear to have been used for oil and gas-related expenses."
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 says.
When the SEC subpoenaed Gabaldon and Ascenergy employees, they shut down the shop, the SEC says.
"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. Its apparent CEO and founder, Benjamin Sasson, is a UK citizen living in the San Jose area, whose LinkedIn profile describes Pyckl as an "[e]nd-to-end mobile web application consultancy and development studio," according to the SEC.
Alanah Energy received $100,000 from Ascenergy, the SEC says. Neither it nor its securities ever were registered with the commission.
Ascenergy, founded in 2012, has no physical location, does its business online, and has no record of oil and gas reserve identification, drilling or production, and no known oil and gas revenue, the SEC says.
Gabaldon, who is "believed to live in Southern California," is the "public face of Ascenergy," the SEC says. His company's website describes him as a "serial entrepreneur who was able to retire at an early age by developing and applying his proprietary hedging methods to the stock market."
The SEC seeks disgorgement, freezing of assets, an injunction and fines.
Ascenergy officials did not respond to an email request for comment.