Fort Worth Man Admits Running Oil And Gas Ponzi Scheme
Approximately 45 Investors Invested Approximately $5.8 Million in Fraud Scheme
FORT WORTH, Texas — A Fort Worth man who was arrested in Oregon, where he fled when a fraudulent oil and gas Ponzi scheme he was running began to unravel, pleaded guilty today to one count of wire fraud, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
Jeffrey Watts, aka “Jeff Watts,” 41, appeared before U.S. Magistrate Judge Jeffrey L. Cureton this morning and pleaded guilty to a felony information, filed on July 8, 2014, charging one count of wire fraud. He faces a maximum statutory penalty of 20 years in federal prison, a $250,000 fine and restitution. Watts has been in custody since his arrest in Eugene, Oregon, in early May 2014 on charges outlined in a related federal criminal complaint filed in March 2014. Sentencing is set for December 9, 2014.
According to documents filed in the case, beginning in fall 2011 and continuing to December 2013, Watts engaged in a scheme to defraud involving oil and gas investments. He presented himself as the founder and principal of Blue Alpha Energy, falsely representing to investors that the company had invested in oil and gas well in Texas and was owned and/or operated by Arrowhead Productions, a legitimate, but unrelated company based in Fort Worth.
Watts established Blue Alpha Energy and a group of related sham entities to perpetrate his fraud scheme by leading investors to believe they were investing in oil and gas wells owned and/or operated by Arrowhead Productions. For example, Watts represented to investors that Arrowhead LG, LLC was an assumed name or “d/b/a” of Arrowhead Productions, and he possessed documents that bore the purported signature of the actual president of Arrowhead Productions, as the President of Arrowhead LG, LLC.
Watts falsely portrayed these sham entities as legitimate, third party lenders or investors in his alleged oil and gas interests, and he transferred investor funds between these accounts and the accounts of Blue Alpha Energy.
Watts falsely represented to investors that they would receive monthly distributions according to their ownership percentage in oil and gas wells owned and/or operated by Arrowhead Productions. He also duped his business partners and employees into believing his fraudulent representations, causing them to disseminate printed investment information that conveyed his misrepresentations. To further the scheme, Watts made monthly payments to investors in Blue Alpha Energy, using investor funds transferred between bank account of the sham entities he controlled.
Between 2011 and 2013, approximately $5.8 million in investments was raised from approximately 45 investors. However, in December 2013, several investors in Blue Alpha Energy learned Watts never had investment agreements with Arrowhead Productions and, in fact, funneled the investor funds into the sham business entities he controlled.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of the FFETF, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
The FBI investigated the case; Assistant U.S. Attorney Nancy Larson is in charge of the prosecution.