The SEC charged four companies and eight individuals in connection with an $80 million oil and gas fraud orchestrated by Chris Faulkner, a Dallas man who calls himself the “Frack Master” for his purported expertise in hydraulic fracturing. The SEC charged Faulkner, CEO of Breitling Energy Corporation (BECC), with disseminating false and misleading offering materials, misappropriating millions of dollars of investor funds, and attempting to manipulate BECC’s stock. According to the SEC’s complaint, Faulkner started the scheme through privately-held Breitling Oil and Gas Corporation (BOG), which offered and sold turnkey oil and gas working interests. Faulker ran most of BOG’s operations while co-owners Parker Hallam and Michael Miller oversaw the sales process. The SEC alleges that BOG’s offering materials contained false statements and omissions about Faulkner’s experience, estimates for drilling costs, how investor funds would be used, and baseless production projections prepared by a geologist whose affiliation with BOG was undisclosed. The scheme evolved to include BOG’s successor, BECG, a reporting company with shares traded on OTC Link, and two affiliated companies Crude Energy LLC and later Patriot Energy Inc. Faulkner allegedly established Crude and Patriot to deceive investors through offerings similar to those conducted by BOG. The SEC alleges that BOG, Crude, and Patriot raised more than $80 million from investors as part of these deceptive offerings. The SEC further alleges that Faulkner misappropriated at least $30 million of investor funds for personal expenses including lavish meals and entertainment, international travel, cars, jewelry, gentlemen’s clubs, and personal escorts. In the midst of this fraud, Faulkner engaged in a scheme to manipulate the price of BECC’s stock by placing trades at the end of the day to “mark the close” of the stock. SEC
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