The SEC has settled securities fraud charges with self-proclaimed “Frack Master” Christopher Faulkner in connection with a securities fraud scheme that raked in more than $80 million from hundreds of investors.
Faulkner will serve 12 years in federal prison for securities fraud, money laundering, and tax evasion, and was ordered to disgorge $23.1 million plus pay another $1.9 million in prejudgment interest for a total of more than $25 million.
According to the SEC’s June 2016 complaint, Faulkner systemically deceived investors by disseminating false and misleading offering materials, misappropriating millions of dollars of investor funds, and manipulating the stock of Breitling Energy Corp. (BECC), a publicly traded company Faulkner controlled.
The SEC alleged that Faulkner misappropriated at least $30 million of investor funds for personal expenses, which included cars, jewelry, gentlemen’s clubs, personal escorts, lavish meals, entertainment, and international travel.
Faulkner promoted himself on TV and radio appearances as an expert in “fracking” or hydraulic fracturing, which is the process of drilling and injecting fluid into the ground at a high pressure to fracture shale rocks in order to release natural gas.
Faulkner even wrote a book that was published in 2014 called “The Fracking Truth,” in which he touted himself as the “Frack Master.” However, the SEC said he was no expert on the subject, and that his exposure to the oil and gas industry was limited to running a website data hosting company that had oil and gas companies as clients.
“Faulkner first proclaimed himself the ‘Frack Master’ in order to deceive investors about his expertise and steal millions of dollars to fund his lifestyle,” said Shamoil Shipchandler, director of the SEC’s Fort Worth Regional Office. “Today’s serious civil and criminal sanctions serve as a warning to anyone who intends to target retail investors.”
The SEC said Faulkner started the scheme in 2011 through privately held Breitling Oil and Gas Corp., which offered and sold “turnkey” oil and gas working interests to investors using a team of cold callers. As part of the offerings, Faulkner lied to investors about his experience, the drilling-cost estimates for the prospects, and the use of their invested funds.
The SEC also charged 11 other individuals and entities for their roles in the misconduct and has reached settlements with most of them.
Under the agreed final judgment, which has been approved by the court, Faulkner is also permanently enjoined from violating various provisions of the federal securities laws and from participating in any unregistered securities transactions and is barred from serving as an officer or director of any SEC-reporting company, and from participating in any offering of a penny stock.