August 21, 2017
SEC Final Judgement
On July 24, 2017, the Securities and Exchange Commission (SEC) obtained a final judgement against Andrew Farmer for orchestrating a pump-and-dump scheme involving Chimera Energy, a company that purportedly developed revolutionary technology to enable oil and gas production without the environmental impact of fracking.
The original SEC charges, released on August 14, 2014, claimed that Chimera Energy did not license or possess the supposed environmentally-conscious technology and had not achieved the claimed results in commercially developing it. This Complaint further claimed that Farmer obtained control of all 5 million shares of the company stock issued in the initial public offering by disguising his ownership through the use of nominee shareholders. In 2012, the SEC suspended trading in Chimera Energy and prevented Farmer and other players in the scheme from misleading new investors.
The 2014 SEC Complaint charged three additional players in the Chimera Energy scheme with securities fraud, registration violations, and reporting violations. Carolyn Austin, who was charged with helping Farmer profit from his scheme by dumping shares of Chimera Energy Corp. in the midst of Farmer’s promotional efforts, was permanently enjoined from violating Section 5 of the Securities Act, imposed a permanent penny stock bar, and was ordered to pay approximately $59,000 in disgorgement and prejudgment interest and a civil penalty of $80,000. The SEC also charged two figurehead CEOs installed by Farmer—Charles Grob, Jr. and Baldemar Rios—who approved the misleading press releases and operated Chimera Energy at the minimum level necessary to give the appearance of legitimacy while concealing Farmer’s involvement altogether. In August 2016, final judgements imposed a one-year officer-and-director bar on Rios and ordered Grob to pay approximately $79,000 in disgorgement and prejudgment interest and a civil penalty of $15,000.
On July 18, 2017, the U.S. District Court for the Southern District of Texas ordered Farmer to pay $7.2 million in disgorgement and prejudgment interest and a civil penalty of approximately $2 million. The final judgement further states that Farmer is permanently enjoined from violating Sections 5 and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and imposes permanent penny stock officer-and-director bars.
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