$23M Oil Investment Fraud with Payson Petroleum

Payson Petroleum 3 Well Program Investment Losses

Did you lose money investing in Payson Petroleum 3 Well Program at the recommendation of your investment advisor? If so, The White Law Group may be able to recover your losses through FINRA Arbitration.

According to the SEC, settlements were entered in Texas federal court with two brothers it accused of raising $23 million in fraudulent investment offerings for an oil and gas well project, Payson Petroleum 3 Well Program.

Many oil and gas LPs have high expense ratios, and due to the decline in the overall health of the oil and gas market, are suffering. Some are on the brink of default, or worse yet, bankruptcy.  Such an outcome is extreme, but not unforeseen. It only highlights the unsuitability of these investments for most retail investors – particularly in large concentrations.

The consent orders were entered last November, the same day the SEC filed a complaint against Matthew Carl Griffin, 39, of Flower Mound, Texas, and William Daniel Griffin, 50, of Argyle, Texas. The SEC alleged the brothers made numerous misrepresentations to investors in connection with their 3 Well Program in Grayson County, Texas.

The Griffins allegedly conducted their scheme through their company Payson Petroleum Inc. between November 2013 and July 2014, raising $23 million from about 150 individuals across the country, according to the SEC.

The SEC further alleges that the Griffins misrepresented to investors that Payson would contribute 20 percent of the offering amount, or $5.4 million, and that its contribution would cover 20 percent of the cost of the wells; that Payson’s consideration as sponsor, operator and co-investor would be capped at 20 percent of any petroleum revenue from the wells; and that it would cover any cost overages beyond the estimated cost of $24 million.

The SEC said that Payson contributed no money to the offering or well costs, appropriated the entirety of the offering proceeds, and lacked the financial means to pay any overage. When it began its offering, Payson had only $58,722 in its bank account, according to the SEC complaint.

Payson Petroleum Private Placement Offerings

The White Law Group is investigating the liability that brokerage firms may have for recommending other Payson Petroleum private placements offerings.

Payson Petroleum often raises money for investments through Reg D private placements. These Reg D private placements are then typically sold by brokerage firms in exchange for a large up front commission, usually between 7-10%.

The Trouble with Private Placements

The trouble with alternative investment products, like Payson Petroleum offerings, is that they involve a high degree of risk and are typically sold as unregistered securities which lack the same regulatory oversight as more traditional investment products like stocks and bonds.

An additional risk inherent to Payson Petroleum offerings is also the general risk that comes with the energy market – a market that has seen enormous losses over the last few years.

The White Law Group is specifically investigating the following Payson Petroleum offerings:

Payson Drilling Fund 2015 I
Payson Drilling Fund 2015 II LP
Payson Group LP
Payson North Texas Multi Well I LP
Payson Petroleum Jenny #1 LP
Payson Developmental Drilling Fund 2014 II LP
Payson Petroleum 3 Well 2014 LP
Payson Petroleum 3 Well LP

Broker dealers that sell alternative investments are required to perform adequate due diligence on all investment recommendations. They must ensure that each investment is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.

However, another unfortunate by product of Reg D private placements is that the high sales commission brokers earn for selling such products may provide some brokers with enough incentive to push the product to unsuspecting investors who do not fully understand the risks of these types of products.

If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be liable for investment losses.

Also brokers can earn high commissions for selling Reg D private placements. This may drive them to push the product to unsuspecting investors who do not fully understand the risks of these types of products.

If a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be liable for investment losses.

Free Consultation

To determine whether you may be able to recover investment losses incurred as a result of your purchase of a Payson Petroleum 3 Well Program or another Payson Petroleum investment, please contact The White Law Group at 1-888-637-5510 for a free consultation.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington.