Have You Suffered Losses due to Investments in Saltwater Disposal Wells with Sandlapper Securities LLC?
Posted on Tuesday, October 24th, 2017 at 8:37 am
Erez Law is currently investigating Sandlapper Securities, LLC representatives Trevor Gordon (CRD# 2195122) and Jack Bixler (CRD # 22331) who sold saltwater disposal wells to investors with excessive, undisclosed excessive markups ranging between 67 to 376 percent, through an owned and controlled middleman “development” company that they owned and operated.
Saltwater disposal wells earn revenue by accepting saltwater and other byproducts of oil and gas extraction.
The relevant time period is April 2011 through November 2015. Gordon, Bixler and two former registered representatives formed a fund to invest in saltwater disposal wells. They sold interests in the fund, through Sandlapper Securities, LLC and made all investment decisions for the fund, including which wells to acquire and what prices to pay for the investments.
According to the FINRA complaint, Gordon and Bixler, “extracted ill-gotten profits for themselves through their control of the fund.” The complaint alleges that the fraudulent markups by Gordon and Bixler totaled more than $8 million. The complaint further also alleges that investors were not informed that the fund would pay or had paid excessive markups for its purchases of interests in saltwater disposal wells from the development company. Sandlapper served
as the managing broker-dealer for the fund and was aware of the scheme through Gordon and Bixler.
According to his CRD, Bixler “repeatedly violated his fiduciary duties of loyalty to the fund by causing the development company to usurp opportunities to invest in the wells and by causing the fund to purchase interests in those wells from the development company at excessively marked up prices. Bixler breached his fiduciary duties of care to the fund by engaging in transactions with affiliates without taking steps to ensure that the fund was paying fair prices for its investments, such as abiding by the promise to obtain independent appraisals as represented in the PPM.” The fund owned a smaller percentage of each well it purchased, and investors in the fund earned correspondingly lower distributions resulting from the fund’s well interests. The complaint alleges that the development company engaged in buying and reselling well interests, which were securities, but Gordon and Bixler failed to register the development company with FINRA or the Securities and Exchange Commission.
As manager of the fund Gordon had fiduciary duties to the fund, and he violated those duties by causing the development company to control the fund’s investment opportunities and resell those investments to the fund at excessive prices. By failing to take steps to ensure fair pricing to the fund, Gordon used the development company to extract ill-gotten profits from retail investors who purchased interests in individual saltwater disposal wells outside the fund. Gordon’s firm also failed to adopt reasonable procedures to address conflicts of interest in transactions involving affiliates. According to Gordon’s CRD, “Moreover, because Gordon and the firm were aware of the frauds being perpetrated in connection with sales of fund and well interests, and permitted registered representatives of the firm to sell the interests, Gordon and the firm failed to reasonably supervise the firm’s sales activities. Gordon and the firm did not even acknowledge that individual well interests were securities and allowed them to be sold away from the firm for compensation without any supervision, other than requiring registered representatives to submit ‘outside business activity’ disclosures.”
Bixler was president of the Capital Markets Division of Sandlapper during the relevant period. Bixler has been registered with Sandlapper Securities, LLC in Greenville, South Carolina since 2006.
Gordon was CEO of Sandlapper during the entire relevant period, had supervisory responsibility for all sales at Sandlapper Securities, LLC, and for some of the relevant period, served as CCO of Sandlapper Securities, LLC. Gordon has been registered with Sandlapper Securities, LLC in Greenville, South Carolina since 2006.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Sandlapper Securities, LLC may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against Sandlapper Securities, LLC financial advisors Trevor Gordon and Jack Bixler, who sold saltwater disposal wells to investors with excessive, undisclosed markups, through an owned and controlled middleman “development” company that they owned and operated. If you were a client of Sandlapper Securities, LLC or another firm, and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.