On July 2, 2009, the SEC obtained an emergency asset freeze and other relief in a $485 million offering fraud and Ponzi scheme orchestrated by Provident Royalties LLC and others.
The SEC allleges that from at least June 2006 through January 2009, Provident fraudulently sold stock promising profits though oil and gas assets. The complaint alleges the sales were made to more than 7,000 investors throughout the United States. It is also alleged that the sales were primarily solicited by unaffiliated retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide. However, the SEC’s action does not seek any relief from these retail broker-dealers.
According to the SEC’s complaint, investors were falsely promised yearly returns of up to 18 percent and misrepresented to investors that 85 percent of the funds raised through the offerings would be used to purchase interests in oil and gas real estate, leases, mineral rights, and interests, exploration and development. The SEC alleges that, in fact, less than 50 percent of investor funds were used for their stated purpose, and the proceeds from later offerings were used to pay expenses related to earlier offerings and returns to investors in those offerings.
Our firm currently represents a number of Provident investors throughout the United States in claims against the brokerage firms which sold them these investments. The firm is filing multiple claims with FINRA securities arbitration claims against the brokerage firms that sold the investments in an effort to recover clients’ investment losses. The allegations include that the brokerage firms failed to perform adequate due diligence before recommending and selling the Provident and Shale Royalties investments.