DALLAS – A high-profile oil and gas magnate who calls himself the “Frack Master” has pleaded guilty to defrauding investors of $23 million, according to the U.S. Department of Justice.
Chris Faulkner, the CEO of Dallas-based Breitling Energy Corporation (BECC) from Dallas who made frequent appearances on national and international news outlets advocating for the oil industry, admitted to orchestrating the scheme over a five-year period between 2011 and 2016.
Faulkner also pleaded guilty to $4.5 million in tax fraud and to attempting to manipulate his company’s stock.
“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,” Erin Nealy Cox, the U.S. Attorney for the Northern District of Texas, said in a release. “Let this case send a message that this type of egregious investor fraud will prosecuted to the fullest extent of the law.”
According to the DOJ release Tuesday, Faulkner fielded payments of more than $71 million from investors between 2011 and 2016. Those payments were based on operations costs Faulkner had intentionally multiplied as much as eight-fold, and he kept the difference between those falsified projections and his actual expenses.
Faulkner also paid a geologist on his staff to fudge a “geology report” that bolstered projections for his wells to attract investors.
He “routinely oversold shares, then transferred investment funds into comingled accounts, despite promising investors their money would be deposited in a segregated bank account used only to pay for drilling activities,” according to the DOJ.
Faulkner only paid out $6.2 million to investors while using his $23 million in ill-gotten funds for personal expenses, including lavish meals and entertainment, international travel, cars, jewelry, gentlemen’s clubs, and personal escorts.
In 2016, the Securities and Exchange Commission filed a lawsuit against Faulkner alleging an even larger-scale, $80 million fraud plot after the FBI raided his Dallas office.
“Chris Faulkner allegedly orchestrated a sophisticated and multilayered scheme using BECC and its affiliated entities as a conduit to access millions of investor dollars,” Shamoil Shipchandler, director of the SEC's Fort Worth office, said at the time. “The financing for Faulkner’s opulent lifestyle came directly at the expense of unwitting investors across the country.”
That lawsuit had since been settled, according to the DOJ. Faulkner was ordered to forfeit $23.8 million and handed several business-related sanctions, including being exiled from any SEC-reporting company.
In June of 2018, though, Faulkner was arrested at the Los Angeles Airport.
In July, his ex-wife, Tamra Freedman, and his friend, Jetmir Ahmedi, were ordered to pay back $1.2 million they received as part of the $80 million scheme alleged by the SEC, according to the Dallas Morning News.
Records show Faulkner was being held at a low-security federal corrections facility in Seagoville, Texas. He faces 12 years in prison and $350,000 in fines, as well as restitution to defrauded investors, according to the DOJ.
