The SEC entered into a settlement on its recently-filed securities suit against defendants Southlake Resources Group, LLC (“Southlake”), Cody Winters, and Nicholas Hamilton. The defendants consented to entry of the SEC’s proposed final judgments without admitting or denying the allegations in the SEC’s complaint.
The SEC alleged that from approximately June 2010 through approximately September 2014, Winters, directly and through Southlake, a company he owned and controlled, raised more than $5.2 million from more than 70 investors in 26 states by selling interests in several oil-and-gas joint ventures. None of the offerings were registered with the Commission, and none of the individuals that Winters and Southlake employed to cold call potential investors, including Hamilton, were registered with the SEC as a broker or associated with a registered broker.
The SEC further alleged that in written offering material provided to investors, Winters and Southlake made untrue and misleading statements and omissions of material facts regarding, the use of offering proceeds, projections for oil-and-gas production and revenue, and commingling and loaning investor funds. In addition, the SEC alleged that in each offering, Winters overstated the projected well costs by almost 100% and omitted to disclose to investors Southlake’s actual cost and profit information.
Finally, the SEC alleged that at Winters’ direction, Southlake engaged in conduct contrary to written representations to investors about the use of offering proceeds. For example, Southlake took undisclosed profit and overhead payments from the offering proceeds and used offering proceeds to acquire working interests for itself in undisclosed transactions.
The consent agreement with the SEC required the company to pay back $5,235,650 collected from investors, plus $285,761.70 in interest, as well as penalty payment from Winters and Hamilton of $160,000 and $50,000, respectively.
Jeff Petersen is an attorney licensed to practice in California and Illinois representing clients in a wide variety of SEC investigations and enforcement matters. He can be reached in California at 858.792.3666 and in Illinois at 312.583.7488.