The Oilprice.
com Guide to Oil & Gas Frauds and Scams
A Million Ways To Lose Your Shirt in Oil & Gas
The Oilprice.com Guide to Oil & Gas Frauds and Scams
Oil and gas investing is a minefield. It’s one thing if you
already know it’s a minefield and just have to be careful
where you step. It’s quite another thing if you don’t even
know you’re in a minefield. From whichever place you’re
standing, it’s a dangerous segment for the investor. This
report contains vital information about oil and gas fraud,
tools for avoiding scams and smart advice for smart
decision-making. Don’t lose your shirt—do your homework.
The shale boom has ushered in a new era of oil and gas
fraud that is vastly more creative and widespread than it has
ever been. The US Securities and Exchange Commission
(SEC) may have been dealing with a few sparse cases a year
less than a decade ago, but today it’s looking at more than
20 fraud cases a year. The vultures have come out in
massive numbers, and they are circling the skies for easy
investor prey.
We’ve seen just about everything fraudsters can come up
with by now in the industry—still, they never cease to adapt
to new circumstances and new regulations, so I’m always on
the lookout for new scams. We’ve handled a fair number of
due diligence investigations targeting individuals and com-
panies in the sector, and we’ve come to realize that there are
two types of fraud on a broad level: the very blatant type that
investors continue to fall for day after day, and the subtle
type, which takes place along that very fine line between
truth and deception. If you’re a new oil and gas investor, you
need to worry about both. If you are a veteran oil and gas
investor, you probably only need to worry about the second.
What we’re offering in this in-depth 20+-page report is this:
The three categories of fraud
Several case studies demonstrating the large variety of
scams and frauds that destroy investors every year
How to spot a Corporate Sociopath before he takes you
for a ride
What goes down in the ‘Boiler Room’ and why it’s so hot
in there
Why oil and gas promoters can be your best friend or
your worst enemy
The tools you need to sort out the truth from the lies
And, then, next month: To complement this, a complete
resource guide that—among many other things—will help
you dabble in your own due diligence before you make an
investment
Keep reading because the information contained in this re-
port highlights the number one threat to your investment and
also how staying on top of the ever-evolving world of oil and
gas fraud is nearly impossible without some sage advice
Oil & Gas Fraud: Four Flavors
There are four basic ways that oil and gas investors are
fooled, and most of the case studies contained in this report
will fit into one of these four overall scenarios:
Scenario 1: You are asked to invest in an existing well that
is over-hyped while the promoters know that the well is not
likely to produce much, if anything at all.
Scenario 2: You are asked to invest in a well and told your
money will go toward development and completion of the
well, but promoters misrepresent how your money will be
used. Your money is in part to pay off expensive promoters
and Boiler Room telemarketers and the rest lines personal
pockets (pays the personal mortgages of the arrangers,
pays off unrelated debt, sends the promoters’ children to
expensive private schools, etc.)
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Scenario 3: You invest in a company that doesn’t even
exist except on paper, through a broker who isn’t registered
and they take your money and run in a Ponzi scheme.
Scenario 4: You get caught up in an overseas oil and
gas-related scheme offering you millions for letting some-
one ‘park’ their money with you outside their country—but
you lose your shirt in a litany of advance fees and never see
the money.
Forms of Oil & Gas Investment
Limited partnership interests: In a drilling limited
partnership, an oil and gas company sells partner-
ship 'units' to investors and uses the money raised
to lease property and drill wells (unless it's a fraudu-
lent operation). The company 'manages' the
project—usually for an upfront fee, which is a
percentage (typically around 15/16% of your invest-
ment). The company also shares in the revenue
generated. The investor gets a handsome first-year
tax write-off and quarterly cash distributions from
the sale of oil and gas produced from the wells in
question. This is where we see the most fraud go
down, making this the highest-risk area of oil and
gas investing. These are securities at the end of the
day and they are not liquid.
Ownership of fractional undivided interests in leases:
These are also securities and also carry a high level
of risk. This is an interest only in the proceeds of oil
and gas sold, not in the oil and gas itself.
General partnerships: In its truest form, investors
actively participate in the operations and are person-
ally liable for partnership debts.
Whether you’re a smaller investor or a larger investor who is
considering private securities transactions, the risk in this
industry is immense. Smaller investors may even have more
protection than larger investors because it is assumed that
the latter always know what they’re doing—but this isn’t the
case in this ever-dynamic environment. It’s challenging at
best to keep up with the changing nature of oil and gas
scams and frauds.
When it comes to private securities transactions, the risk
can be very high, particularly because there is no liquidity as
the securities often cannot be resold, and do not trade on
exchanges. Because only investors who have a high net
worth and high income are allowed to buy private securities,
regulators automatically assume they don’t need as much
protection from the industry wolves as small investors do.
Just because an investor meets these higher income
requirements doesn’t mean he or she knows the oil and gas
industry well enough to avoid fraud.
This is an industry in which the term ‘guarantee’ should
never be used, and if it is, a scam is around the corner.
Consider this: According to the FBI in Dallas, around half of
all investor losses under investigation by the bureau involve
oil and gas fraud.
At the more sinister end of the fraud spectrum are the
‘paper only’ companies. This is a common scheme that
lures in the most gullible of investors. This is a smaller-time
scam that targets small-time investors who may or may not
have ever invested before. The modus operandi is to lure
investors in by a referral from a broker—who cold calls the
victims and who is complicit in the scheme. The investors
are then sold shares in shell corporations that exist only
on paper.
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This is how it plays out:
A broker cold calls you (this is an immediate alarm bell)
You invest a modest amount in what is described as a
low-risk, fairly lucrative deal
You get some symbolic dividends to keep you hooked
(these so-called payouts are usually from cash taken
from other investments being lured into the scam)
So, you’re hooked; now they offer you a much more
lucrative investment that is much “higher-risk”; you bite.
When Exxon Mobil Isn’t Exxon Mobil
In a case filed by the SEC in 2014, a Florida promoter was
charged with fraudulently offering limited partnership units
in two oil drilling projects that he claimed had been acquired
from Exxon Mobil Corp. This was a father-and-son duo:
Paul and Jeffrey Downey, in 2010 and 2011 used their com-
pany, Quest Energy Management Group, Inc. to raise at
least $4.8 million from 17 investors through fraudulent offers
and sales of interests in a limited partnership called Permian
Advanced Oil Recovery Investment Fund I, LP (PAOR) and
fraudulent offers of Quest preferred stock.
"Fraudulent oil and gas deals are frequently structured
with the limited partnership (or other legal entity) in one
state, the operation and physical presence of the field
in a second state, and the offerings made to prospec-
tive investors in states other than the initial two states.
Thus there is less chance of an investor dropping by a
well site or a nonexistent company headquarters. Such
a structure also makes it difficult for law enforcement
officials and victims to identify and expose the fraud."
- (North American Securities Administrators Association)
How did they do it? They drafted a fraudulent private place-
ment memorandum (PPM) for the PAOR offering containing
‘overt lies and materially misleading omission” regarding
Quest’s financial health and viability. They also lied about
debt and liens on oil and gas leases in which PAOR claimed
to be acquiring an interest. Finally, they lied about current
and projected oil and gas production from the leases and
fudged alleged ‘independent audits’.
And … they had help here. They recruited John M. Leonard
to solicit investors for them, but Leonard was neither a
registered broker nor associated with any registered broker.
Leonard received over $400,000 in compensation for his
snake-oil salesmanship.
What to take home from this?
For starters, always make sure you’re dealing with a regis-
tered broker. The US Securities and Exchange Commission
(SEC) requires oil and gas brokers to be registered through
FINRA as ‘Broker Dealers’. FINRA is the Financial Industry
Regulatory Authority and they have a database where you
can check out your broker-dealer. http://www.finra.org/
Investors who were taken for a ride on this deal could have
also looked up the company’s financials through the SEC by
using this resource: http://www.sec.gov/edgar/searched-
gar/webusers.htm
The Boiler Room—The Hot Room for Cold Calls
The Boiler Room is where it all starts for many scams. This is
where the high-pressure sales tactics go down over the
phone, perpetrated by a temporary ‘army’—as the SEC
refers to them—of cold callers hired to scam you out of your
money. Usually, thinly traded micro-cap stocks are the sale
of choice in Boiler Rooms. The end game here is quite
simple: They take your money, pay their Boiler Room
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expenses and then pocket the rest or invest a very small
amount of your money in an actual oil or gas well that won’t
be half as good as advertised. If anyone cold calls you
regarding an oil and gas investment, this alone should send
off alarm bells. Anything unsolicited is suspect. But there are
also indicators of fraud as well if you’re still not convinced:
When they tell you opportunities are ‘limited’, they’re lying.
If they were so limited, they wouldn’t need to cold call in
the first place.
If they use words like guaranteed returns, assume the
opposite
If they try to make an oil or gas investment sound risk-free,
they can’t. Oil and gas is one of the riskiest investment
arenas out there and the legitimate companies with good
acreage and lots of potential will tell you that this is a risk
(along with potentially high reward).
NSAAA Warns Against These Cold-Call Phrases
You will have an interest in a well that cannot miss;
The risks are minimal;
A geologist has given the salesperson a tip;
The salesperson has personally invested in the venture;
The promoter has "hit" on every well drilled so far;
There has been a tremendous "discovery" in an adjacent
field;
A large, reputable oil company is operating or planning to
operate in the area;
Only a few interests remain to be sold and you should
immediately send in your money in order to assure the
purchase of an interest;
This is a special private deal open only to a lucky chosen
few investors.
NSAAA (North American Securities Administration Association)
Where Your Money Might Really End Up
This is perhaps where the majority of investors get tripped
up. In these cases, pretty much always involving small-cap
or micro-cap companies, the companies actually exist, and
they probably have oil and gas acreage, but they lie about
what they are using your cash for.
Take this 2014 case for example:
According to the SEC, Guardian Oil and Natural Gas, Inc.
(GONG) and Guardian Oil and Gas, Inc. (Guardian), led by
one Rick Mullins, raised $6.5 million by failing to disclose the
companies’ deteriorating financial condition to investors.
Investors didn’t know about pre-existing bank loans—nor
did they attempt to find out. At the end of the day, the $6.5
million they invested wasn’t used to develop oil and gas
wells; it was used instead to pay off debts that weren’t even
related to the companies’ oil and gas activities. They also
told investors that they would directly receive revenue from
the sale of oil and gas from the project. The reality was that
the operators here were using revenues to pay expenses on
other unrelated projects. This is called ‘net checking’.
Or this case study from 2011:
According to the SEC, Petroleum Unlimited told investors
that they could expect returns of 14% to 141% (quite a
spread--and based on absolutely nothing) annually. We’re
not sure how much they ended up raising, but over 80% of
what they raised was used to pay for expenses that had
nothing to do with oil drilling. Most of it looks like it went to
pay off sales people who landed them the investments in the
Boiler Room. Sales commissions here were up to 74%!!
Two years earlier …
The SEC accused Wellco Energy LLC of misleading inves-
tors about what their money would be spent on. Almost
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Basic Due Dilligence Checklist
Start with this checklist, but don't stop here:
How long has the sponsor been in business?
Has the sponsor company changed its name in the
past 10 years?
Is the investment being offered though a registered
FINRA broker dealer?
Is the offering filed with the state securities commission?
Has either the broker or sponsor company had any
regulatory problems?
Are they or have they ever been sued by other investors?
Can you determine their financial track record and their
record of returns versus investments?
60% of the money raised didn’t go to oil and gas wells. It
went to … drum roll, please … paying the promoter’s
personal mortgage and child support fees (along with
massive sales fees).
The key lesson learned here is this: If oil and gas promoters
are cold-calling you from the Boiler Room, you know right
away that even if this is a legitimate oil and gas offering (which
it’s not going to be 99% of the time), your money is going to
have to go to fund this promotion. Boiler Room salesmen are
very good at what they do—and they are VERY expensive. As
you see from the case studies, they can net some 75% of
your total investment just for bringing you in the door.
‘Burn’ Notice—When There Isn’t Really Any Oil
Convicted felon Ronald Blackburn and the executives of
Treaty Energy Corporation were behind this scheme. To wit,
in 2008, Blackburn formed Treaty Energy Corporation
through a reverse-merger of a private oil and gas company
and a dormant public shell. Blackburn controlled 86% of the
Have you looked up their financial records with the SEC?
Can you find anyone who has done business with
them before?
Is their website professional?
How do they communicate with investors?
Will funds be kept in a separate escrow or co-mingled
with other funds? (you don't want the latter)
Who will be responsible for taxes?
How will oil & gas produced be transported to market?
Is the infrastructure already in place?
Who makes decisions about completing or abandon-
ing wells?
company’s shares and this was not disclosed to the SEC, so
Blackburn was effectively controlling the company illicitly
behind the scenes. In 2010, Treaty won drilling rights in
Belize through a joint venture. A year later, they were using a
stock promoter to publish misleading information on
message boards creating massive hype around the project.
By January 2012, the company was claiming to have struck
oil in Belize—citing 5-6 million barrels of recoverable oil.
This immediately caused stock prices to jump—almost 80%
in a single day.
Here’s the kicker: There was no oil. The announcement was
false. The stocks had already shot up, even though the
government of Belize on the very same day as the oil discov-
ery announcement said no oil had been found. Blackburn
and his entourage, however, refused to back down—even as
the scam was clearly collapsing. Still, it would be months
before share prices started to return to the levels they were
before the false oil discovery announcement.
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In addition to this, between 2009 and 2013, Blackburn sold
shares of Treaty in an unregistered public offering, raising
some $3.6 million from 90 different investors. By the
summer of 2013, Treaty had depleted all of its authorized
shares. By then Blackburn had already made a killing on the
sale of shares boosted by a fake discovery announcement,
and he was ready to move on to his next scam. In January
2014, without telling shareholders, Treaty abandoned
Belize, assigning all of its assets to Hackmeyer Real Estate
Group in a ‘blanket security agreement’. This was collateral
against funds Hackmeyer had loaned Treaty for the devel-
opment of the fake Belize oil discovery and other bogus
efforts in Texas.
The next scam would take place in West Texas, where
Treaty offered investors oil and gas working interests in a
well that they were told had an initial production rate of 62
barrels per day and a life span of 20 years. The reality was
much different: The well wasn’t producing nearly this much.
In fact, it had only produced a total of 235 barrels from
October 2013 to October 2014. Nonetheless, investors took
the bait and bought $565,000 in interests in this well. The
money was supposed to go to the well’s development, but
most of it was misappropriated.
What to take home from this:
Do extensive due diligence: Blackburn was a convicted
felon already when he started up Treaty. Investors are too
impatient when they see what they think is easy money
coming their way. A little bit of research goes a long way.
Corporate sociopaths such as Blackburn don’t stop; they
can’t stop. They will keep trying their hand at oil and gas
schemes and each time you have to dig deeper to find
them under the paperwork.
Just because a company says it has struck oil doesn’t
mean it has. Treaty Energy Crop. went quite far with its
scam, insisting not only that it had struck oil but put a
remarkable figure of 5-6 million barrels of recoverable
reserves out there. Did anyone even bother to check up
on this? We doubt it. For anyone who has been working
in the oil and gas industry for long enough, these figures
would have seemed implausible, especially the ‘recover-
able’ bit, but for new investors in this sector the alarm
bells might not have gone off quickly enough. (If you
missed our earlier report on discoveries, be sure to circle
back to that. In that report we dissect some discovery
announcements for you and help you navigate this com-
plicated and easily manipulated world).
You will probably have caught on by now to the practice
of media promotions of oil and gas companies. The
Blackburn case is an immediate lesson in this respect.
We’ll talk about this in more detail below, but for the main
lesson here is: Don’t believe anything you read. It’s
almost all paid for.
The most endearing trait of what we call the Corporate
Sociopath is their exceptional understanding of the
gullibility of people with money (that’s you, the investor).
They talk a fabulous game; they play a fabulous game;
and it would seem that gold is dripping from their mouths.
Their sheer confidence lulls you into a sense of security
and makes you think you need not do your own due
diligence. The best of the best Corporate Sociopaths can
run the same scams time and time again, and the shale
boom has brought them out in full force.
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Profile of a Corporate Sociopath
Perhaps more than any other, the case of Corporate Socio-
path Bret Boteler and his Dallas-based investment firm
EnerMax, which is now thankfully closed down, allows us to
profile these types and learn from them—especially how
best to avoid them.
Boteler’s fraud is serial. But what you need to understand
about Corporate Sociopaths is that this is a condition that
doesn’t go away. It’s a sickness; a disease. There’s never a
one-off with a corporate sociopath. In Boteler’s case, he’s
been at it for over two decades. He first popped up on the
SEC radar in 1998—when he was still a very young investor
and an amateur bodybuilder. At this time, Boteler was a
junior member of Dallas-based Kinlaw Securities, which
was facing a mountain of fines for selling worthless oil and
gas stakes in their Boiler Room. Boteler betrayed Kinlaw
and cut a deal with the feds. (But, interestingly and unfortu-
nately for the investors, the SEC’s case against the compa-
ny for defrauding investors of $125 million was dismissed by
a Dallas judge, which ruled that the investors had enough
power and information to be deemed partners).
This was not to be the end of Boteler’s career, however;
rather just the beginning. In 2001, he founded EnerMax. The
company managed to raise $17.3 million between 2007 and
2011 from 260 investors. At stake here were 45 wells. Of
these wells only three made any money at all, and more than
half were abandoned. While investors were being taken for
a ride, Boteler was getting rich pocketing their money. His
salary was $1.3 million, and he awarded himself massive
bonuses and wrote off personal expenses. His investors
funded private school for his children.
The most important point for me here is exactly what Botel-
er’s lawyer opined: “This is not a garden variety securities
fraud case. […] It’s not the sort of case where he took
money and never drilled anything.”
THIS IS THE MOST IMPORTANT LESSON YOU CAN
LEARN HERE.
This is exactly what the most skilled type of corpo-
rate sociopath does: He runs on just enough legiti-
macy to make it real—and you lose money. This is
also the most difficult type of fraud to detect and
hands down the most important scenario for
deep-dive due diligence and psychological profiling.
The legitimacy ruse in this case includes:
Actual producing wells (just close enough to what you
thought it would be);
Actual drilling activity;
A fairly impressive media presence: Interviews in local
mainstream media that described him as a homegrown
entrepreneur. He wasn’t hiding in a Boiler Room any
longer. He was out there, an oil and gas ‘talking head’,
and ‘expert’ of sorts;
There was no lurking in dark corners here. Boteler even
personally took investors out to see the wells they would
invest in and wined and dined them, talking a great game
and gaining natural trust;
To this day, some of his investors appear torn about
whether he is a fraudster or just made some bad deci-
sions when things didn’t work out as he planned. Don’t
be fooled: this is the part of the game that allows corpo-
rate sociopaths to start up something else.
In these scenarios, the truth is in the lies--the truth is twist-
ed, subtly and expertly. EnerMax was selling Permian Basin
projects to investors. This is a massively attractive basin. It
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always has been, but the shale boom revived the sleeping
giant. Anyone drilling here could easily attract investor atten-
tion. Here’s the trick: He banked on his investors not really
understanding much about geology or drilling depths. Ener-
Max was drilling in historically successful basins—but he
was drilling a mile below these formations. This is where
nothing is proven and becomes highly speculative. The
other side to this story is the investors themselves: They
definitely weren’t savvy enough to understand this, so the
information here was easy to finesse and one would say that
it was on the fine line of fraud. The SEC also alleged that
Boteler misled investors about his experience. He was a
bodybuilder and then a Boiler Room boy—not an experi-
enced driller.
As for Kinlaw and friends, they closed down in Texas and
then popped up again in Colorado Springs with a new com-
pany: HEI Resources. In 2009, the state’s securities com-
mission sued them for fraudulently raising more than $300
million from investors on over-hyped drilling projects. Again,
the case was dismissed.
Lesson learned? This is a tough one. Your only
protection against the Corporate Sociopath is
extremely intuitive due diligence, that usually can’t
be done at home. Do yourself a favor and hire a
professional. These guys know how to straddle the
fence of legitimacy and legality and you will usually
be on the losing side without proper counsel.
Oil & Gas Goes Ponzi
Five former oil and gas executives from a company called
Provident Royalties LLC of Dallas pleaded guilty to federal
criminal charges in connection with a $485-million Ponzi
scheme. The head of the scheme, Blimline, was sentenced
in May 2012 to 20 years in prison after pleading guilty in
2010 to a mail fraud charge in two separate criminal prose-
cutions related to the schemes. The schemes were operat-
ed out of Michigan and Texas between 2003 and 2009.
Welcome to the Ponzi
A Ponzi scheme is a type of illegal pyramid scheme
named after Charles Ponzi, who fooled thousands of
New England residents into investing in a post-
age-stamp speculation scheme back in the 1920s.
Ponzi schemes continue to work as money from new
investors is used to pay off earlier investors. Ultimately,
the scam will collapse leaving investors with nothing to
show for their trust.
This is how the scheme played out in Michigan, between
2003 and 2005: Blimline and his cohorts promised inflated
rates of return in order to get cash out of investors. They had
absolutely no legitimate source of income to make payouts
to investors, and Blimline diverted investor payments to his
own pocket. He took a total of $28 million from investors
before the scheme collapsed.
True to form, when the Michigan scheme collapsed he
moved on to Dallas, Texas, where he enticed 7,700 investors
into dumping a shocking $400 million into Provident, which
also collapsed in 2009.
In a smaller but more recent Ponzi scheme from 2013,
Robert A Helms and his Vendetta Royalty Partners LTD
misled investors about their experience in oil and gas to
raise some $18 million. The $18 million was supposed to be
used to purchase oil and gas royalty interests, but this was
just another Ponzi scheme.
What to take home from this:
Again, the corporate sociopath knows only the limit of
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prison bars; failure isn’t failure, it’s just another challenge
to try again further away.
A very small and inexpensive amount of due diligence
here could have saved investors $485 million. Trust me,
due diligence is worth it. (And in our next report on
resources for oil and gas investors, we’ll show you the
best resources for performing your own due diligence,
among many other things).
Bogus Energy Companies
The SEC filed civil fraud charges against a Miami-based
company, Wall Street Capital Funding LLC, in 2011 for
promoting bogus energy companies and for playing a “criti-
cal role in a number of penny-stock scams” by putting
together and widely distributing PR material for ghost com-
panies—among them, PrimeGen Energy Corp.
Here’s the story on PrimeGen: First, it was allegedly incorpo-
rated in Bridgewater, New Jersey and claimed to own oil and
gas operations in Russia. It convinced investors—through
hard-hitting PR materials—that it had some 12 oil wells in
Russia that it brought to production in only 9 months, gener-
ating millions in revenues. For the average investor, it’s pretty
hard to verify what’s going on in Russia, and whether claims
such as these are true. For this, you need to hire outside
help. But at home, a little due diligence would have gone a
long way to determining there was never any need to do due
diligence in Russia because none of what PrimeGen was
saying was true. Here is the harsh reality:
PrimeGen didn’t even have corporate headquarters; just
a rented mailbox at a UPS store with no forwarding
instructions.
PrimeGen didn’t even have a phone line; the number it
listed for potential investors wasn’t answered.
PrimeGen’s website was thrown together by simply copy-
ing and pasting another website’s source code.
The good old boys at Wall Street Capital Funding LLC
promoted this fake company to the best of their ability;
promising massive returns on cheap stock. They were
paid for their services in stock. They promote the compa-
ny, watch the value of shares rise suddenly and make a
killing on each glossy-eyed investor.
What to take home from this one?
That’s easy. Never believe what you read. Promoters step in
when there isn’t a single corporate sociopath to lead the
game in the right direction—or to talk a game that investors
are sure to buy. Promotion is becoming a huge business in
itself, and we expect to see a continuing barrage of SEC
charges against reckless or downright corrupt promoters.
Promoters get MOST of your money. This means that
there is not much incentive to find or develop the best oil
& gas prospects because the promoter gets paid just for
FINDING YOU. He gets money in his pocket regardless.
Virtually everything you read about small oil and gas com-
panies is bought and paid for. The supermajors buy and
manipulate their own media coverage as well, but they can
also make the news legitimately, simply because they are
huge. Not so for smaller companies. To make the news,
they have to pay for the news—and they are paying for
someone to come up with a newsworthy angle to ensure
that it gets wide play.
Promotion generally takes on three forms:
1) Paid-for news coverage (with no indications that it was
paid for)
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2) Online stock promoters who use hard-hitting
(car-salesman-like) writing (complete with lots of exclama-
tion points) to oversell a company. This often entails
manipulating information and numbers to look better than
they are; sometimes with outright lies, but often simply by
leaving out pertinent information and banking on inves-
tors not understanding how to read between the lines.
3) Company promotional materials that are distributed
among potential investors; PowerPoint presentations,
videos, brochures, etc—all written by expert promoters
who either knowingly inflate figures or flesh out lies or
simply don’t do their own research on the company they
have taken on as a client.
Promotion is a burgeoning creative industry itself. It’s
sometimes a great thing. There are a lot of good oil and gas
companies out there who are sitting on fabulous prospects
but don’t know how to get the word out there; thus they
don’t get the investment they need to develop these pros-
pects. What the investor has to do is figure out which ones
are being promoted legitimately, and which ones are not.
Here’s an example of the type of stock promotion
you should be very wary of:

Tiny, undiscovered...
VIRTUS OIL & GAS VOIL is a MUST-BUY on NEW Report!

This $1 stock just confirmed a low-end resource

estimate of $44.05 Per Share* in Recoverable Oil!"

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 The Oilprice.com Guide to Oil & Gas Frauds and Scams

Virtus Oil & Gas VOIL may have just beat a group of Industry Titans to the
punch on what could prove to be a Major U.S. Oil-Find – Parowan Project, Utah!

Virtus just released an independent property assessment by renowned oil and

gas consulting firm Gustavson Associates confirming a Low-end resource
estimate of 266 MILLION Barrels of Oil!

Even at just 10% of that Low-end resource estimate, Virtus is looking at a pro-
spective oil resource of 26.6 Million Barrels valued at over $2 BILLION or $44.05
Per VOIL Share!

Dear Fellow Profit-Seeker,

My name is Charles Moskowitz, editor of The Moskowitz Report, and I'm only
interested in one thing: Bringing YOU exclusive, undiscovered stock situations
that can make you independently wealthy.

Just like I did with Osiris +2,000% gains and Cheniere Energy +980% gains -
among many others...

I have a proven knack for uncovering ten-bagger stocks early and often...leaving Wall Street's
self-proclaimed "experts" wondering just how I do it.

It all comes down to my exhaustive, independent research, which has once again uncovered a
true profit-gem in Virtus Oil & Gas VOIL!

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 The Oilprice.com Guide to Oil & Gas Frauds and Scams

YES, THAT'S...
$44.05 PER SHARE
in potential resource value...and did I mention Virtus
is currently trading below $2 per share???

Translation: Virtus Oil & Gas has every indicator of joining my distinguished list of
tenbagger stocks. You need to jump on this one immediately!

To maximize your VOIL profits:

FIRST, read my full report on Virtus Oil & Gas. NEXT, call your broker or go online and
establish your early VOIL position below $2 quickly before it spikes higher. THEN, sit back
and enjoy the profit-ride as this U.S. oil-bonanza goes into full-blown overdrive!

VOIL could quickly TRIPLE

On this BREAKOUT News!
When Virtus's management team pulled off what I describe as the miracle acquisition of the
55,477 acre Parowan Prospect - I immediately elevated VOIL as my Top Energy-Pick of 2014.

In fact, every time I look at the chart, I still can't believe I have this golden opportunity to get
my loyal audience members into Virtus at true seed-level prices below $2.00 per share. The
near-term potential is truly amazing – and best of all, YOU are hearing about it first!

In my opinion, VOIL should already be

trading multiples above its current price
range.

With a low-end – and I repeat...

LOW-END resource estimate of 266
Million barrels in the heart of a major
developing area-play right here on Ameri-
can soil ...I believe my early identification of
Virtus's incredible upside will cement my
legacy as a legendary stock picker.

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 The Oilprice.com Guide to Oil & Gas Frauds and Scams

All you need to do is jump on Virtus early and low!

In my full Virtus Oil & Gas VOIL report,

I'll show you:

Proven Profit-Point: In the world of speculative investing, fortunes are made by being early to the
game. RIGHT NOW...is that crucial moment in your lifetime where you step up to the plate and secure
an early position in VOIL before the pending payoff!
Click below for my full report on Virtus Oil & Gas VOIL. My promise to you as a fellow stock specula-
tor...there are no gimmicks here and you can keep your credit card in your wallet. Your report pops up
the moment you go here.

To your future wealth,

Charles Moskowitz, Editor

The Moskowitz Report

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 The Oilprice.com Guide to Oil & Gas Frauds and Scams
You’ll note—just barely—the tiny print disclaimer at the
bottom that indicates this is a paid advertisement, and
removing any responsibility from the promoters. This means
it is YOUR responsibility to understand what you are reading,
why you are reading it and why this company needs to be
promoted in this manner.
This is what Seeking Alpha’s Penny Stock Realist had to say
about this company’s stock promotion:
Suspicious Marshall Islands identity holding 2 million
free trading shares and past CEO with numerous ties to
past stock promotions.
Virtus Oil and Gas Corp. (OTCQB:VOIL) is a name that I
believe is currently the target of a penny stock promo-
tion scheme. It is my view that the stock's intrinsic value
is somewhere near $0, and it is with conviction that I
recommend that any investors currently in the name sell
the entirety of their stakes immediately. I also believe
that Virtus Oil and Gas Corp. is a stock definitely worth
shorting. My track record of identifying and publicly
exposing such highly overvalued equities is excellent …
Africa: Scam Central
Let’s turn the tables now. Someone wants to give YOU
money. Let’s say you have a small-cap oil and gas company
and an ‘investment lawyer’ contacts you via email purporting
to represent a politically exposed person from an oil-produc-
ing African country who is looking to invest in an oil and gas
company discreetly.
Now, we talk to a lot of seasoned investors in our line of
work, and we also run due diligence for them occasionally.
Recently, a veteran oil man whom we’ve known for some
time came to us with a request that we look into a deal in
South Sudan for tens of millions of dollars. This oil man
would probably not have given this a second thought had it
not been for the fact that this opportunity was referred to him
through a trusted source. A purported investment lawyer
contacted the trusted source via email, saying he was
looking for small European or North American oil and gas
companies in which to invest millions on behalf of a very
high-profile client—a rebel leader, in fact—in South Sudan.
For some reason or other, the trusted source let this slip by
as a legitimate deal—and this is the most brilliant aspect of
this scam. Nine times out of ten, if the scam artist can get
past a trusted source, he is half way to seeing his scam
realized. We never got to see how this particular scam might
have played out because a brief due diligence investigation
squashed it right away. The investigation turned up the
following key points:
The firm the ‘investment lawyer’ claimed to work for did
not exist;
The website for this fake firm was created less than a
month before;
The website for this purportedly highly sophisticated
investment law firm was thrown together at the last minute
using a free website template;
The office phone numbers were unattended;
A mobile phone number offered by the organizer of this
scam was registered under a different name;
As soon as official requests for basic due diligence
(corporate registration, passport documentation, etc) and
Know Your Customer (KYC) forms were sent, the scam
artist went silent.
How might this have played out? We can’t be sure, but most
likely there would have been a sudden request for a ‘commit-
ment fee’ from the oil and gas company before the tens of
millions of alleged investment money were transferred (and
they never would be).
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 The Oilprice.com Guide to Oil & Gas Frauds and Scams
This scam is a work in progress, in my opinion—something
new that still has a few kinks in it. The scammer isn’t quite
sure who to target, and how, and he absolutely has to avoid
due diligence investigations. At the very least, the victim in
this scenario would have lost a small percentage on tens of
millions of dollars. At the most, however, he could have been
ended up in serious legal trouble.
There are a lot of scams coming out of Africa these
days—particularly out of Nigeria. These scams are many and
varied, and highly dynamic. A large number of them have
been perpetrated by individuals claiming to work for the
Nigerian National Petroleum Council (NNPC) either as staff
or contractors. These are called “419” scams, as they repre-
sent violations of Section 419 of the Nigerian Criminal Code.
A typical NNPC 419 scam offers targeted victims an oppor-
tunity for a percentage of millions of dollars for assisting
someone who is placing large sums of money in overseas
bank accounts (parking money). The scam is in the ‘advance
fees’. These advance fees that the victim is asked to pay is to
cover the expenses of taxes, transfer fees, bribing govern-
ment officials, etc—all of which would be reimbursed to the
target once the funds are parked in the overseas bank
account. It is all made to look official through a fake contract
with the NNPC—contracts that are very well put together
and impossible to fault short of actually verifying them direct-
ly with the Nigerian government. But if you even have to do
this, it is a scam. The NNPC will never conduct business with
a third party over email or telephone—only in person. Even if
you are directed to the NNPC website, beware: Scam artists
set up fake NNPC websites, like this: www.nnpcnigeria.org
The Russian Oil Ministry Makes you the Deal of a Lifetime
Run, as fast as you can. We guarantee you that the Russian
Oil Ministry has not contacted you for an oil and gas oppor-
tunity. But the latest version of this scam is incredibly
intricate and potential victims tend to be lured in by the com-
plexity. Complexity doesn’t make something real, however; it
just means the scam artists have put more effort into it.
The particular scam goes to great lengths to set up fake
Russian government agencies, associations, banks, law
firms, shipping companies and even due diligence websites.
It includes highly sophisticated fake documents as well. It’s
really an all-inclusive scam. The end game here is to get
investors to pay in advance for oil that doesn’t exist, with
advance payments getting as high as $150,000. This
advance fee is typically attributed to some licensing fees or
taxes, contracting services, authorization fees, or other fees
attached to the “Russian Oil Ministry”.
Here is some of typical ‘advance fee’ language to look
out for:
“Seller pays for the legalization/registration of the ‘con-
tract’ directly to the Ministry of Energy”
“Buyer pays to obtain Transaction Passport Transfer
Certificate (TPTC) / Export Clearance Affidavit (ECA)
which defines the buyer’s intention and competence”
“Buyer will open file with the Seller Company, the fee for
which will be calculated based on the volume of the
signed contract. The fee stands for operational charges
and payment will be TT wire transfer.”
“Upon verification of the above documents by the Buyer,
the Buyer pays via T/T wire transfer the total Vessel Char-
ter Fees to re-route the course of the vessel tanker to the
Buyer’s discharge port.”
“Fee for Transfer of Ownership Title of Product. Title trans-
fer ownership.”
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Behind Bars Characteristics of Fake Companies

Arthur Apple/Western Pipeline Corporation: Sentenced in April 2012 Advertising on B2B networks (Alibaba, ec2l.com, Tradekey,
to 10 years in federal prison and ordered to pay $53 million in restitution
Gmdu.net, EcPlaza, Tradeboss ...)
after pleading guilty to conspiracy to commit securities fraud. Apple and
his co-conspirators misled, deceived and defrauded prospective investors Websites thrown together in a hurry, using free website
by misrepresenting and failing to disclose material facts. They assumed templates and platforms
false identities when communicating with prospective investors, and Initial contact by email Use of VOIP (virtual phone numbers)
claimed to be investors in past Western Pipeline oil and gas development which can be forwarded anywhere in the world
projects that supposedly had been successful.
The 'Rand Brothers/Aspen Exploration Inc.: Four members of the
Rand family and one other individual were convicted in this scheme. Aspen Where Does it All End?
was the managing partner of oil and gas well programs offered and sold to
It doesn’t. Fraudsters have an amazing ability to adapt with
investors throughout the U.S. Investors purchased securities in the form of
joint venture programs created to promote and sell working interests in oil their changing environment, and indeed, this is what makes
and gas leases. The Rands diverted investor funds for their own use, and
failed to disclose that a key manager had been convicted of several federal
it interesting. These case studies—of which there are many,
offenses, including bank fraud and money laundering. Gregory Keith Rand many more—only represent those who have been caught.
was sentenced to 18 years in prison, his brother William Nicholas Rand 14
years and their father 5.5 years. They were ordered to pay almost $100 There are plenty who haven’t. And in terms of the Corporate
million in restitution and forfeit luxury assets purchased with investor cash. Sociopath, we know who a lot of them are. We can’t name
Alan Todd May/Prosper Oil and Gas: Between July 2008 and March
them here because that would be slander since they haven’t
2010, Alan Todd May raised some $7 million from investors under false
pretenses. This was a Ponzi scheme that saw Prosper sell mineral rights it been charged—and in some cases not even accused—but
didn't even own and overselling those that it actually did own, wildly
overstating the production revenue. Ponzi payments were disguised as
rest assured they are out there and waiting for your money.
royalty payments to investors. He pleaded guilty to mail fraud and admitted Make sure you do your homework, or get someone who
using investor funds for extravagant personal expenses and payments to
his mother, daughter, brother and ex-wife. He is awaiting sentencing and knows the business to do it for you. Some of the worst fraud-
faces up to 20 years in prison. sters are hiding in plain sight, so use these tools to help you
Robert Baxter Wilson/Excalibur Energy Corporation: Wilson raised
navigate and understand their world.
nearly $4 million from investors by misleading them about his experience
and qualifications and concealing his criminal history. He pleaded guilty to
securities fraud and received a sentence of probation. He forfeited assets It is truly a tough world to navigate, especially when some
to the government. analysts—such as well-known trader Dan Dicker—think that
Tommy Eugene Barber/T-Bar Resources LLC: Barber raised $13.5
the whole business of shale is a Ponzi scheme. Maybe not in
million from investors in multiple fraudulent offerings. He stole most of the
money for personal use. He pleaded guilty to two counts of securities fraud the intentional, sinister sense, but in reality. This is why, he
and is presently serving 10 years.
says: “…the business of drilling for [shale oil] creates an
Tracy Lee Pool/Reunion Resources LLC: Pool raised around $3 million
from investors through fraudulent oil and gas sales. Pool took off with most endless circular appetite for more drilling for lesser returns.
of the money and the rest was used for Ponzi payments to investors
[…] Constant fresh capital is needed to generate false gains
(presented as oil and gas profits). He pleaded guilty to securities fraud and
was sentenced to 51 months in prison. and pay off early investors.”
Joshua Wayne Bevill: Bevill raised several million from investors by
selling interests in supposed oil and gas development projects that he did In the meantime, stick with us because next month we’ll be
not own. He ran off with the money. He lured investors in by pretending to
bringing you a huge resource guide that can help you do your
be a former investor himself (along with others) to serve as references. Then
he went on to form another fraud—while awaiting sentencing on the first own due diligence and better understand all the aspects of
one. The new fraud focused on Progressive Investment Partners. Using a
the oil and gas industry before you make any new invest-
false identity, Bevill contacted potential investors and sold them
investments in a supposed oil and gas business. He then simply stole their ments. This will be sort of a ‘do-it-yourself’ resource tool that
money and spent it.
will hopefully save you a lot of time and money down the road.

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