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SEC, NASAA Warn of Oil & Gas Investment Scams

October 14, 2016 Blog

The energy sector continues to be a popular choice for fraudulent investment advisors and scam artists seeking to solicit money from unsuspecting investors. In particular, “investment programs” involving oil and gas projects – and specifically the drilling of new wells – have been identified as some of the primary tools that scammers are using to entice investors to entrust their funds.

These scams are becoming so prevalent that the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) have both issued alerts warning of the risk of oil and gas investment fraud.

“Boiler Rooms” and Internet Solicitations Are Common in Oil Investment Scams

The SEC’s and NASAA’s alerts both highlight the use of so-called “boiler rooms” to sell fraudulent oil and gas investments. Boiler rooms are locations where salespeople sit in front of phones and call potential targets, using high-pressure sales tactics to try to get them to invest in supposed investment opportunities. Salespeople in boiler rooms are trained to peak investors’ interest and keep them on the phone until they feel convinced (or pressured) to invest. Some examples of boiler room tactics include:

  • Referencing recent news related to oil and gas prices
  • Promoting “can’t miss” wells
  • Claiming to have inside information
  • Claiming to have personally invested in the opportunity
  • Offering “special” or “private” deals that are available for a limited time only

If you receive a call from someone you don’t know pitching an oil or gas investment opportunity, the best thing you can do is to simply hang up the phone.

NASAA’s alert also warns of Internet sales pitches, which often come in the form of professional-looking emails offering what appear to be legitimate and well-researched energy investment opportunities. But, the same rule applies here: If you don’t know the person offering the investment, you probably shouldn’t respond.

Tips for Avoiding Oil & Gas Investment Fraud

As a result of these concerns, the SEC and NASAA both advise asking lots of questions before considering any oil or gas investment opportunity. This includes asking questions of the salesperson as well as getting in touch with the appropriate regulatory authorities. NASAA’s alert also includes a checklist of five key areas to investigate before sending money in connection with any potential oil or gas investment opportunity:

  • Registration – Is the investment program registered? If not, is it subject to a legitimate exemption?
  • Salesperson – Where are they calling from? What is their background in oil and gas investments? Are they registered and licensed as required?
  • Firm – What is the name of the firm offering the investment? What is its history? What other investments does it offer?
  • Investment – Where will your funds be deposited? What are the fees and expenses? Where exactly is the well and what are current production levels in the region?
  • Lease – Who owns the land where the well is being drilled? What are the material terms of the lease? Are rent payments being made?

For more information, you can review the alerts on the SEC’s and NASAA’s websites:

Speak with an Investment Fraud Attorney at Zamansky LLC

If you suffered losses in an oil or gas investment program, the attorneys at Zamansky LLC can help. Our firm represents individuals nationwide in claims to recover their fraudulent investment losses. For a free, confidential consultation about your rights, call (212) 742-1414 or request an appointment online today.

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