Stephen L. Bailey, Sapphire Exploration LLC, and Harris Exploration Inc.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25851 / September 25, 2023
Securities and Exchange Commission v. Stephen L. Bailey, Sapphire Exploration LLC, and Harris Exploration, Inc., No. 3:23-cv-2130 (N.D. Tex. filed September 25, 2023)
SEC Sues Texas-based Oil-and-Gas Promoter for Multi-Million Dollar Fraud
The Securities and Exchange Commission today charged oil-and-gas promoter Stephen L. Bailey and two companies that he controls, Sapphire Exploration LLC (Sapphire) and Harris Exploration, Inc. (Harris), for orchestrating a series of fraudulent oil-and-gas offerings and for misusing $5 million of the $7.8 million raised from investors.
According to the SEC’s complaint, from approximately November 2017 through May 2023, the defendants raised money from investors for various oil-and-gas projects and properties through the sale of promissory notes, limited-partnership interests, common stock, and working interests in oil-and-gas wells. The SEC’s complaint alleges that the relevant offering documents stated that investor funds would be used for specific oil-and-gas investments, acquisitions, or related expenses. However, according to the SEC’s complaint, Bailey misappropriated and misused $5 million of the $7.8 million raised from investors, including $4.1 million to pay for personal expenses and nearly $670,000 to make Ponzi-like payments to investors. The SEC’s complaint also alleges that Bailey furthered the fraudulent scheme by falsely touting Sapphire’s management team and misrepresenting Harris’s purported acquisition of an oil-and-gas company in Oklahoma.
The SEC’s complaint, filed in U.S. District Court for the Northern District of Texas, charges Bailey, Sapphire Exploration, and Harris Exploration 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. The complaint seeks permanent injunctions and disgorgement with prejudgment interest against Bailey, Sapphire, and Harris, as well as civil penalties, an officer-and-director bar, and a penny-stock bar against Bailey.
The SEC’s continuing investigation is being conducted by Christopher W. Ahart and Ayesha Ahmed of the Fort Worth Regional Office, and supervised by Jim Etri and Eric Werner. The litigation will be conducted by Matthew J. Gulde and supervised by B. David Fraser.
Last Reviewed or Updated: Sept. 25, 2023