Star Exploration, Inc. and James T. Gurgainers

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20837 / December 23, 2008

COURT APPOINTS RECEIVER IN SEC FRAUD ACTION AGAINST OIL AND GAS PROMOTER

Securities and Exchange Commission v. Star Exploration, Inc. and James T. Gurgainers (Civil Action No. 3-08-CV-2248-O, United States District Court; Northern District of Texas; Dallas Division)

On December 22, 2008, the Securities and Exchange Commission filed a civil action in Dallas federal court against Star Exploration, Inc. and its principal, James T. Gurgainers. The Commission alleges that the defendants conducted fraudulent oil and gas securities offerings between December 2005 and May 2008, raising over $12 million from over 160 investors nationwide. Upon the Commission's request, the court appointed a receiver over the assets acquired with investor funds.

Specifically, the Commission alleges that, among other things, Gurgainers solicited investors for completion funds for dry holes, failed to use investor funds as offering materials represented, and improperly pooled and commingled investor funds from different ventures contrary to offering materials. The complaint further alleges that Gurgainers used offering proceeds from one entity to pay other entities' expenses and diverted at least $700,000 for his personal use.

The Commission alleges that each defendant violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Commission seeks against each defendant a permanent injunction, disgorgement of ill-gotten gains (plus prejudgment interest), and a civil penalty. The Commission also names the following Gurgainers-controlled entities as relief-defendants: Star Georgetown 1 Joint Venture, Star Mineral Royalty 1-A, LP, Star Mineral Royalty 1-B, LP, Star Discovery, LP, Star Hamilton 2 Joint Venture, Lagniappe Oil & Gas Leases, LLC, Star Exploration Leasing, LLC, Discovery Drilling, LLC, Discovery Rigs, LLC, Terra Ferma Operating, LLC, Star Financial International, LLP, and 1 AP.com, Inc.