SEC Alleges That The Heartland Group Ventures, LLC is a $122M Ponzi-like Scheme

Last Updated: December 9, 2021

INVESTORS: The SEC has obtained emergency relief and charged The Heartland Group Ventures, LLC – in addition to ten related entities and five associated individuals – of being a $122 million fraudulent oil and gas offer.

If you have invested in The Heartland Group Ventures, LLC or any of the associated entities or individuals, we want to hear from you, as you may have options to seek financial damages. Contact us now to discuss your rights and options with an investment fraud attorney at Sonn Law Group.

What are the Specific Allegations Made Against The Heartland Group Ventures, LLC in the SEC Complaint?

Below is the text from the SEC’s complaint regarding The Heartland Group Ventures, LLC:

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COMPLAINT

Plaintiff United States Securities and Exchange Commission (“SEC”) alleges:

1. This case concerns an oil and gas offering fraud conducted over three years. Between at least October 2018 and October 2021, The Heartland Group Ventures, LLC (“Heartland Group Ventures”), Heartland Production and Recovery LLC (“Heartland PAR”), and their principals, initially John Muratore (“Muratore”) and Thomas Brad Pearsey (“Pearsey”), and later James Ikey (“Ikey”) and Rustin Brunson (“Brunson”), have fraudulently raised approximately $122 million from more than 700 investors nationwide, purportedly for working over existing wells or drilling new wells in Texas, through five unregistered securities offerings–three debt funds and two equity funds—for which there was no applicable registration exemption. Over the course of the five offerings, Heartland Production and Recovery Fund LLC (“Debt Fund I”); Heartland Production and Recovery Fund II LLC (“Debt Fund II”); The Heartland Group Fund III, LLC (“Debt Fund III”); Heartland Drilling Fund I, LP (“Equity Fund I”); and Carson Oil Field Development Fund II, LP (“Equity Fund II”), the Heartland Defendants’ spent only about half of the investor funds they raised on oil and gas projects, which collectively generated less than $500,000 in revenue. Beginning in at least 2019, the Heartland Defendants used investor funds to make more than $26 million in Ponzi payments to debt fund investors.

2. The Heartland Defendants made material misrepresentations and omissions to investors regarding the oil and gas projects in offering documents for the five securities offerings. For example, they falsely told investors that certain oil wells were producing hundreds of barrels of oil a day, including wells that had yet to produce a single barrel of oil. They told investors the wells were operated by Texas oil and gas operators with experience dating back to 2003; those operator entities didn’t even exist until 2017. The truth about the wells’ lack of production and the operators’ lack of experience, which the Heartland Defendants failed to research, was publicly available on websites for the Texas Railroad Commission and Texas Secretary of State, respectively. The Heartland Defendants and Defendant Alternative Office Solutions, LLC (“AOS”), which managed Heartland investor accounts, also made material misrepresentations and omissions to investors regarding the oil and gas projects in marketing materials for the five securities offerings, falsely representing production and reserves, among other things.

3. Beginning in at least September 2019, Defendants Heartland Group Ventures, Ikey, and Brunson failed to disclose the majority ownership and control of Heartland Group Ventures by Ikey, who was convicted of conspiracy to commit wire fraud in 2014. The Heartland Defendants entrusted Ikey with investors’ personal information, including their financial information.

4. Between at least February 2019 and September 2021, the Heartland Defendants directed a total of more than $54 million of Heartland investors’ money to Defendants Manjit Singh (aka “Roger”) Sahota (“Sahota”), ArcoOil Corp. (“ArcoOil”), and Barron Petroleum LLC (“Barron Petroleum) (collectively, the “Sahota Defendants”) and a third Sahota entity, Relief Defendant Dallas Resources Inc. (“Dallas Resources”), for projects involving working over existing oil and gas wells or drilling new wells. The Heartland Defendants entrusted the bulk of the money they spent on oil and gas well projects to the Sahota Defendants and Dallas Resources despite receiving numerous red flags regarding their use of investor funds and the projects, including Sahota’s repeated refusal to provide requested information about title, project status, revenue, and costs.

5. The Sahota Defendants and Dallas Resources used millions of dollars in Heartland investor fund proceeds to purchase a private jet, a helicopter, real estate in the Bahamas, and on other non-oil and gas expenditures for themselves.

6. The Sahota Defendants also made material misrepresentations to Heartland, its investors, and persons who solicited prospective investors about the existing and potential production of wells, including by providing periodic statements that reflected materially inflated or otherwise altered oil production revenues for certain wells and a reserve report that reflected a materially altered valuation for gas reserves. Defendant Sahota also made misrepresentations about projected production of a gas well that was being drilled to Heartland personnel, persons who solicited investors, and at least one investor who attended an April 2021 field trip to the drill site.

7. The SEC sues to enjoin the Defendants’ misconduct; to marshal
and safeguard assets for the benefit of investors; to prevent further harm to investors; and to hold defendants accountable for their violations of the federal securities laws.