The Securities and Exchange Commission announced Friday charges against Houston-based penny stock company Chimera Energy and four individuals behind what the agency said was a “pump-and-dump scheme” that misled investors to believe the company was on the brink of developing revolutionary technology to enable environmentally friendly oil-and-gas production.
The SEC alleges that Andrew I. Farmer orchestrated the scheme by creating a shell company called Chimera Energy, secretly obtaining control of all shares issued in an initial public offering in late 2011, and launching “an aggressive promotional campaign” midway through 2012 to hype the stock to investors.
“Chimera Energy issued around three dozen press releases in a two-month period about its supposed licensing and development of technology to extract shale oil without the perceived environmental impact of hydraulic fracturing known as fracking,” the SEC says. However, Chimera Energy “did not actually license or even possess the technology it touted and had not achieved the claimed results in commercially developing it.”
While the stock was being pumped by the false claims, entities controlled by Farmer dumped more than 6 million shares on the public markets for illicit proceeds of more than $4.5 million, the SEC stated in a Friday release.
The SEC says that it suspended trading in Chimera Energy stock in 2012 and prevented Farmer and his associates from dumping additional shares or misleading new investors into their scheme.
In addition to Chimera Energy and Farmer, the SEC’s complaint charges a pair of figurehead CEOs installed by Farmer. The SEC alleges that Charles E. Grob Jr. and Baldemar Rios approved the misleading press releases and operated Chimera Energy at the minimum level necessary to lend the company a veneer of legitimacy while concealing Farmer’s involvement altogether. The SEC’s complaint also charges Carolyn Austin with helping Farmer profit from his scheme by dumping shares of Chimera Energy stock in the midst of the promotional efforts.
“Farmer and his accomplices secretly rigged the market for Chimera Energy stock and illegally profited by exaggerating the company’s capabilities and technology,” said David Woodcock, director of the SEC’s Fort Worth Regional Office, in the release. “They seized on fracking as a topic of public discourse and aggressively touted an entirely fictitious business to attract unwitting investors.”