Two companies with Texas connections and their owners will pay civil penalties totaling $600,000 after the U.S. Securities and Exchange Commission sued them for misleading investors in more than a dozen unregistered oil and gas securities offerings totaling more than $250 million.
Stefan Toth, president and co-founder of Irving-based HomeBound Resources LLC, and Thomas Powell, founder of Nevada-based Resolute Capital Partners LTD LLC, agreed to settle the order without admitting or denying the SEC’s findings, the regulatory agency announced Friday The SEC said both also acted as unregistered brokers.
HomeBound Resources and Resolute Capital each agreed to pay a penalty of $225,000 while Toth and Powell will each pay $75,000, according to the SEC.
“Today’s settlements provide important protections for investors, including prohibiting the respondents from participating in any oil and gas offerings for two years and requiring an independent compliance consultant to review policies, procedures and offering materials for any further offerings for three years,” said SEC Enforcement Division associate director Carolyn Welshhans.
HomeBound Resources, a subsidiary of HomeBound Financial Group LP, acts as a project sponsor for Resolute Capital, a private equity firm with offices in Texas. HomeBound Resources was responsible for identifying and buying oil and gas wells in which Resolute Capital owned interests.
From 2016 to 2019, the companies and salespeople acting on their behalf sold debt and equity securities based on interests in oil and gas wells. According to the SEC lawsuit, the companies provided insufficiently supported projections of future oil production, overstated cash reserves and made incomplete disclosures about the uses of investor funds.
Toth and Powell approved one-page documents for potential investors with inaccurate oil well production projections, the suit alleged. In one offering, Resolute Capital reportedly projected it would produce 510 barrels of oil per day. After nearly two years of production, the wells in that offering averaged only 40 barrels per day, according to the SEC.
The legal filing also said Toth and Powell approved debt offering materials that claimed debt issuers would lend funds to PetroRock, HomeBound Resources’ sister company, which would then acquire oil and gas leases, fund its operations and make interest payments on other debts. Investors were not told that a majority of the assets would be used to pay investors in other debt funds.
“Resolute Capital Partners is disappointed we have fallen short of the SEC’s expectations,” said Resolute Capital chief compliance officer Jacqueline Kuiper. “We look forward to continuing our work of investing in unique companies and bringing new opportunities to market in the real estate and technology space during our temporary pause in energy investments.”
The SEC investigation involved the Nevada Securities Division, the Securities Division of the Washington State Department of Financial Institutions and the Financial Industry Regulatory Authority.
This story was updated Monday afternoon to remove a quote from Resolute Capital chief compliance officer Jacqueline Kuiper. The quote, which said the company believed no wrongdoing was committed, went against Resolute Capital’s agreement with the SEC.