Roy W. Hill, Eric N. Shelly, Clean Energy Technology Association, Inc., and Freedom Impact Consulting, LLC
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25712 / May 8, 2023
Securities and Exchange Commission v. Roy W. Hill, Eric N. Shelly, Clean Energy Technology Association, Inc., and Freedom Impact Consulting, LLC, No. 6:23-cv-00321 (W.D. Tex. filed May 3, 2023)
SEC Halts $155 Million Fraudulent Oil and Gas Offering Scheme
The Securities and Exchange Commission announced that on May 3, 2023, it filed an emergency action in U.S. District Court for the Western District of Texas (Waco Division), alleging that Roy W. Hill and Eric N. Shelly, through two entities they control, Clean Energy Technology Association, Inc. (CETA) and Freedom Impact Consulting, LLC (FIC), were actively engaged in a fraudulent offering that has raised over $155 million from over 500 investors. On May 3, 2023, the U.S. District Court for the Western District of Texas issued orders temporarily restraining the defendants' ongoing offerings, temporarily freezing the defendants' assets, appointing a receiver, and granting other emergency relief.
The SEC's complaint, which was filed under seal, alleges that Hill and Shelly offered investments in funds sponsored by FIC. The Defendants represented that these funds will use investor money to purchase devices that CETA refers to as carbon capture units (CCUs). CETA represented that it builds CCUs and leases them to oil and gas producers to purportedly enhance the recovery and marketability of oil and gas. The complaint also alleges that Defendants represented that FIC and CETA will pay investors returns representing a share of revenues earned from operating the CCUs. The SEC alleges that Hill and Shelly lured investors with false claims that the CCUs are patented, that one of the largest oil and gas companies in the world is a customer, and that the funds sponsored by FIC consistently have generated a ten percent quarterly return.
According to the complaint, however, the investment is a sham, because CETA has not received material revenues from CCU operations, and the quarterly distributions made to investors are sourced from other investors' capital. The complaint alleges that, to conceal and perpetuate the scheme, Shelly and FIC have provided investors with false financial statements that reflect economic activity and investment returns that do not exist.
The SEC's complaint charges Hill, Shelly, CETA, and FIC with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. As to all defendants, the complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties.
The court has scheduled a hearing for May 16, 2023 on the SEC's request for the entry of a preliminary injunction.
The SEC's investigation, which is continuing, was conducted by Jeffrey Cohen and Melvin Warren of the SEC's Fort Worth Regional Office, under the supervision of Nikolay V. Vydashenko and Eric R. Werner. The litigation is being led by Jennifer Reece and Jason Rose, and supervised by B. David Fraser.