Investment Losses with Oil and Gas Scams

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to warn investors about the dangers of Oil and Gas scams.

If you think you’ve found the right oil or gas investment to “strike it rich,” consider this:  it may be a scam.  While some oil and gas investment opportunities are legitimate, many oil and gas ventures are frauds.  Many of these schemes start in so-called “boiler rooms,” where skilled telemarketers use high pressure sales tactics to convince you to hand over your hard-earned money.

Once they have your money, scam artists pay themselves first, often using funds to pay personal expenses.  In the end, only some of your money may be invested in an actual oil or natural gas well, or none at all.

Red Flag Warnings:

If you are considering an oil and gas investment, look for these “red flag” warnings of fraud:

• Sales Pitches Focused on Highly Publicized News.  Scam artists read the headlines, too.  Often, they’ll use a highly publicized news item, like volatile gas prices, to lure potential investors and make their “opportunity” sound more legitimate.
• “Can’t Miss” Wells.  Every investment carries some degree of risk so you should be skeptical of any oil and gas investment opportunity pitched as completely safe.  Fraudsters often spend a lot of time trying to convince you that extremely high returns are “guaranteed” or “can’t miss.” Don’t believe it.
• Unsolicited Materials.  Be especially careful if you receive unsolicited materials about an investment.  Simply ignoring investment-related “junk” faxes, emails, voice mail messages, and regular mail may be your best strategy.  And don’t let a package full of colorful marketing materials impress you, even if it’s sent by certified or overnight mail.  If you’re not going to research an opportunity fully, do yourself a favor and put any unsolicited materials in the recycle bin immediately.  If someone calls to follow up regarding the materials, tell him or her “thanks, but no thanks” and hang up.  [Hanging up is critical because scam artists often use scripted sale pitches to keep you on the phone.]
• Limited Opportunities.  Scam artists often try to give you the impression that the “ opportunity” they are promoting is scarce, hoping you will hand over your money hastily before doing any due diligence.  Resist the pressure to invest quickly, and take the time you need to investigate before sending money.
• High Rates of Return.  Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you’ll get substantially more could be highly risky. And that means you might lose money.
• Tips or Secrets.  A promoter may discourage you from talking about the opportunity with someone you trust, like a loved one, attorney or financial professional.  If that happens, stop listening, and leave or hang up.  Then, be sure to contact us.

Steps You Can Take to Protect Yourself:

• Ask questions and check out the answers. Fraudsters rely on the sad truth that many people simply don’t bother to investigate before they invest. It’s not enough to ask a promoter for more information or for references – fraudsters have no incentive to set you straight. Savvy investors take the time to do their own independent research.
• Contact state oil and gas regulatory agencies.  You may be able to verify information provided in offering materials by contacting the oil and gas regulatory agency in which the wells are allegedly being drilled.  For example, these agencies generally have information about a company’s drilling history that could confirm claims of prior success.

Recovery of Investment Losses

If you have questions about your oil and gas investment and would like to speak to a securities attorney about your potential to recover losses through FINRA arbitration, please call The White Law Group at 1-888-637-5510 for a free consultation.

This information is being provided by The White Law Group,  a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.