Oct. 23–The now infamous “Frack Master” Christopher Faulkner has pleaded guilty to securities fraud, tax evasion and money laundering in what authorities called an $80 million oil and gas scam, federal officials announced Tuesday.
He could be sentenced to a maximum of 12 years in federal prison and must pay back nearly $24 million made from his schemes.
Faulkner, the former CEO of Dallas-based Breitling Energy, became a star in business circles for his high-profile media appearances defending hydraulic fracturing or fracking. He traveled the world speaking to business groups and at energy conferences.
And despite having no background in the energy business, he convinced the Dallas business elite and Texas political elite that he was an oil and gas expert. The college degrees his claimed were fake, and his previous business experience was starting a successful web-hosting firm in Bedford.
The Securities and Exchange Commission effectively shut down Breitling Energy and related businesses after suing Faulkner and 11 others for misusing $23.8 million of the $80 million they raised for oil and gas investments.
The SEC also announced Tuesday that it had settled its 2016 lawsuit with Faulkner and was requiring him to repay that nearly $24 million. As part of the settlement, Faulkner also agreed to never serve as an officer or director of any company that’s required to report to the SEC or participate in any penny stock offerings.
After years of proclaiming his innocence, Faulkner, 41, has now admitted to authorities that he defrauded investors out of millions of dollars and “concealed millions more from the IRS,” according to the U.S. Attorney’s office.
“As Mr. Faulkner continued to deceive his investors about drilling expenses and potential oil well output, he spent their millions of investment dollars on his lavish lifestyle, ” said Erin Nealy Cox, U.S. Attorney for the Northern District of Texas, in a statement Tuesday. “Let this case send a message that this type of egregious investor fraud will prosecuted to the fullest extent of the law.”
Currently, Faulkner is in federal prison in Seagoville and has been awaiting trial. Federal criminal charges were filed against Faulkner in June. Shortly after, he was arrested at Los Angeles International Airport while preparing to board a flight to London for a business trip, his attorney Larry Friedman of Friedman & Feiger said at the time.
In an unrelated case, Faulkner was arrested at the same airport in February. He was wanted on a Rockwall County theft charge for failing to pay a $3,000 printing bill. That case was eventually dropped.
Until then, Faulkner had only been facing civil penalties for his business dealings,
“Faulkner first proclaimed himself the ‘Frack Master’ in order to deceive investors about his expertise and steal millions of dollars to fund his lifestyle, and the SEC put an early end to his second effort to defraud investors in a real estate scheme,” said Shamoil T. Shipchandler, Director of the SEC’sFort Worth Regional Office, in a statement Tuesday. “Today’s serious civil and criminal sanctions serve as a warning to anyone who intends to target retail investors.”
Federal documents revealed that Faulkner oversold shares in his oil and gas investments. And court filing’s also accused him of inflated drilling costs estimates and then pocketing the difference to maintain a “lifestyle of decadence and debauchery,” according to the SEC.
In one case, the SEC lawsuit said, Faulkner told investors the land he secured for $80,000 had cost him $8.2 million. The proceeds were used to buy exotic cars, pay for escorts and on other personal spending.
Court filings said Breitling executive Jeremy Wagers spent $40,000 at Dallas strip clubs over a four-night period in 2014 and that Faulkner referred to one of his credit cards as his “whore card.”
Faulkner has admitted to federal authorities that he “diverted approximately $23 million for his own personal benefit” over five years. He ran Breitling as well as other companies, where his involvement was kept secret, according to the federal officials.
Federal officials successful argued that Faulkner continued to misuse Breitling funds even after he was sued by the SEC. A federal judge froze his assets in August 2017 and appointed a receiver.
A month later, the SEC sued Faulkner for a second time. Federal officials said he had essentially “repackaged” the Breitling scheme and applied it to his new Southern California real estate flipping business.
Faulkner’s role in the company was initially hidden, although his mother — and sometimes his attorney — was listed as a manager.
Also, Faulkner’s ex-wife, Tamra Freedman, was ordered in July to repay $900,000 she received as part of the Breitling scheme. A friend of Faulkner’s, Jetmir Ahmedi, was ordered to repay $222,000 earlier this year.
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