The U.S. Securities and Exchange Commission has sued an Irving-based company and its owner for allegedly misleading investors in over a dozen unregistered oil and gas securities offerings of around $250 million.
Stefan Toth, the president and co-founder of Irving-based HomeBound Resources LLC, and Thomas Powell, founder of Nevada-based Resolute Capital Partners LTD LLC, as well as their companies, were sued by the SEC. Both men and their companies are now expected to pay civil penalties totaling $600,000.
On Friday, Sept. 24, the SEC announced that both men had agreed to settle the order without admitting or denying the SEC’s findings. The SEC said both companies would pay a penalty of $225,000 while Toth and Powell would pay $75,000 each.
SEC Enforcement Division associate director Carolyn Welshhans said the settlement, which prohibits the respondents from participating in any oil and gas offerings for two years, provides important protections for investors. The settlement also requires the respondents to have an independent compliance consultant that will review policies, offering materials, and procedures for any further offerings for three years.
HomeBound Resources, a subsidiary of HomeBound Financial Group LP, acted as a project sponsor for Resolute Capital. Resolute Capital is a private equity firm with offices in Texas.
HomeBound Resources was tasked with identifying and purchasing oil and gas wells in which Resolute Capital owned interests.
According to the SEC, both companies and salespeople representing them sold the debt and equity securities based on interests in oil and gas wells from 2016 to 2019. The SEC said the companies made incomplete disclosures about the uses of investor funds, overstated cash reserves, and provided insufficiently supported projections of future oil production.
The legal filing also accused Toth and Powell of approving debt offering materials that claimed debt issuers would lend funds to PetroRock, which would fund its operations, acquire oil and gas leases, and make interest payments on other debts. Investors were, however, not told that most of the assets would be used to pay investors in other debt funds. PetroRock is HomeBound Resources’ sister company.
Resolute Capital chief compliance officer Jacqueline Kuiper said the company has a spotless disciplinary record and is disappointed it has fallen short of the SEC’s expectations.
Kuiper said the company would continue its work of investing in unique companies and bringing new opportunities to market in real estate and technology during its temporary cease in the energy industry. Kuiper added it is the company’s belief that they committed no wrongdoing.