October 1, 2014 — Company executives owe it to their shareholders to protect their interests by making truthful public announcements concerning the company’s position. When corporate executives artificially pump up the company’s share price and then dump the stock on unsuspecting investors, that’s securities fraud. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 provides for a reward to whistleblowers who notify the Securities and Exchange Commission (SEC) about illegal pump-and-dump schemes. Tipsters are eligible to receive up to thirty percent of the amount the government collects, provided that the recovery tops $1 million.
Houston Company Purportedly Offered Fracking Alternative For Oil Extraction From Shale
Chimera Energy, a Texas penny stock company based in Houston has been charged in a pump-and-dump scheme to dupe potential shareholders into investing in a company that allegedly was poised to bring to market lucrative technology that would allow for the sustainable extraction of shale oil without fracking. Andrew I. Farmer allegedly originated the scam by creating Chimera Energy and then using nominee companies to purchase all of Chimera Energy’s stock issued in a 2011 initial public offering.
After the IPO, Farmer allegedly initiated a 2012 series of press releases and a web-based advertising blitz to publicize Chimera Energy’s claims. In public filings, the company claimed that it had been granted an exclusive license from China Inland to develop methods of environmentally-friendly non-hydraulic extraction. The technology would purportedly replace fracking as a means to extract oil from shale. In reality, China Inland does not even exist.
Farmer allegedly failed to inform investors of his control over the company in any of Chimera Energy’s SEC filings. As Chimera Energy’s stock was being pumped in the deceptive media blitz, Farmer’s nominee entities dumped over six million shares of the company’s stock, returning more than $4.5 million in illicit proceeds.
The SEC is asking for disgorgement of the ill-gotten gains along with financial penalties and prejudgment interest.
Reporting Pump-and-Dump Schemes to the SEC
While Waters & Kraus is not working with a whistleblower on this particular alleged pump-and-dump scheme, we are representing tipsters in similar qui tam matters. If you have comparable claims against a your employer or anyone else engaged in securities fraud, contact us by email or call our qui tam attorneys at 855.784.0268 to learn more about our practice and how we can work together to notify the government about SEC fraud and abuse. Our qui tam lawyers, like Michael Armitage and Gary Paul in the firm’s Southern California office, are committed to advancing and protecting informants’ interests in whistleblower lawsuits.