The US Securities and Exchange Commission (SEC) has charged Chimera Energy and four individuals, for allegedly misleading investors into believing that the firm was on the verge of developing a new technology that would enable environmentally friendly production of oil and gas.
The commission alleged that Andrew Farmer orchestrated the pump-and-pump scheme by first setting up Chimera Energy in order to gain control of all shares issued in an IPO in 2011.
Chimera Energy issued more than 30 news releases in three months boasting about its technology for environmentally friendly production of oil and gas.
The company claimed that its technology could extract shale oil without environmental impact of hydraulic fracturing, dubbed fracking. In reality, however, it neither had the license nor possessed the technology.
The stock was being boosted by the false claims, while entities controlled by Farmer dumped more than six million shares on public markets for illicit proceeds of more than $4.5m.
According to the SEC, Chimera had claimed that it licensed the technology from a company called China Inland, which did not exist.
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By GlobalDataThe SEC investigation found that the acquisition of a license to develop such a technology and the license agreement itself were entirely fictitious.
As well as Farmer, the SEC charged Charles Grob Jr., Baldemar Rios and Carolyn Austin for their alleged involvement in the scheme.
SEC Fort Worth regional office director David Woodcock said: "Farmer and his accomplices secretly rigged the market for Chimera Energy stock and illegally profited by exaggerating the company’s capabilities and technology.
"They seized on fracking as a topic of public discourse and aggressively touted an entirely fictitious business to attract unwitting investors."
The SEC has sought financial penalties and permanent injunctions against those charged.
