The Securities and Exchange Commission (SEC) has taken an emergency action by filing a lawsuit against Roy W. Hill and Eric N. Shelly, along with their controlled entities Clean Energy Technology Association, Inc. (CETA) and Freedom Impact Consulting, LLC (FIC). The SEC alleges that Hill and Shelly engaged in a fraudulent securities offering that has raised over $155 million from more than 500 investors. The U.S. District Court for the Western District of Texas (Waco Division) issued orders on May 3, 2023, temporarily restraining the defendants’ ongoing offerings, freezing their assets, appointing a receiver, and providing other emergency relief.
According to the sealed complaint filed by the SEC, Hill and Shelly offered investments in funds sponsored by FIC. They claimed that these funds would utilize investor funds to acquire carbon capture units (CCUs), devices manufactured by CETA. CETA purportedly leases these CCUs to oil and gas producers, claiming it enhances the recovery and marketability of oil and gas. The defendants further represented that FIC and CETA would provide investors with returns based on revenues generated from operating the CCUs. The SEC alleges that Hill and Shelly deceived investors by making false claims that the CCUs were patented, that a major oil and gas company was a customer, and that the FIC-sponsored funds consistently generated a quarterly return of ten percent.
However, the SEC’s complaint reveals that the investment was a sham. CETA did not generate significant revenues from CCU operations, and the quarterly distributions to investors were sourced from capital contributed by other investors. The complaint also accuses Shelly and FIC of providing false financial statements to investors, misrepresenting economic activity and investment returns that do not actually exist.
The SEC’s complaint charges Hill, Shelly, CETA, and FIC with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against all defendants.
A hearing on the SEC’s request for a preliminary injunction has been scheduled for May 16, 2023.