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SEC Charges Co-Founder of Minnesota-Based Energy Company in Stock Manipulation Scheme

Ryan Gilbertson, co-founder of Dakota Plains Holdings, Inc. has been charged by the SEC with stealing millions of dollars from the company he co-founded. Gilbertson allegedly siphoned off the cash using a variety of schemes, including (1) loaning the company money at terms that were very favorable to him, (2) inflating the stock price to “earn” bonuses, and (3) hiding his ownership percentage of the company.

 

The SEC alleged that Gilbertson’s first scheme involved Gilbertson and his co-founder, Michael Reger, installing their fathers as company’s President and CEO.  Gilbertson and Reger were actually controlling the company behind the scenes.  The first thing Gilbertson did was to get the company to borrow money from him and Reger.  That money was then used to issue dividends to the shareholders.  Because Gilbertson and his wife were shareholders, they received over $440,000 in dividends.

 

In another alleged scheme to take money from the company, Gilbertson got the company to offer him and others a “bonus” as noteholders.  The bonus was tied to the price of the stock and, through the relationships he had with friends and associates, he was able to manipulate the price of the stock and ensure himself of a bonus.  His manipulation of the stock increased the stock price from $0.30/share to over $11.00/share in a matter of weeks.  After the scheme ended, the stock price sank to pennies per share, eventually being delisted.  Overall, the scheme is alleged to have caused Dakota Plains Holdings to pay Gilbertson $32 million in bonus payments.

 

Finally, the SEC alleged that Gilbertson bought and sold stock in the company using various accounts (5 in total) to gain profits of over $16 million.  All of his trades in these accounts were done without filing any of the required public disclosures.

 

Gilbertson’s co-founder, Reger, was also charged separately and entered into a Consent Order with the SEC.  The order contains findings that Reger enriched himself and skirted public disclosure requirements by purchasing Dakota Plains stock using 10 accounts in various names to hide the fact the he owned more than 20% of the company. Reger also reaped millions of dollars in bonus payments.  Without admitting or denying the charges, Reger agreed to pay $6.5 million in disgorgement, $669,365.85 in interest, and a $750,000 penalty.

 

If you want to read more about this case, then please click on the following link: http://www.sec.gov/news/pressrelease/2016-231.html.  If you have any questions about whether your actions comply with the obligation, responsibilities, and duties of insiders, officers, and owners of publicly traded or privately held companies, then please contact Tomlinson & Shapiro at (312) 715-8770.

This post was written by Michael Tomlinson

Michael Shapiro
(312) 715-8770
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