Oil development in Western North Dakota and our state’s economic growth story routinely make headlines – locally, nationally and internationally. It’s important to remember that financial criminals follow the headlines and often use the latest hot topic in crafting their next fraud. Individuals must be diligent in protecting their assets from financial criminals and the scams they perpetrate to exploit the type of economic growth North Dakota has experienced. Among other types of fraud, investors should be on the lookout for Ponzi schemes or high yield promissory note scams dressed up as oil and gas drilling opportunities or real estate development deals in western North Dakota.
The North Dakota Securities Department has received numerous inquiries from investors and potential investors and has opened several investigations pertaining to solicitations for Bakken related investment opportunities and potential investment scams. Please contact our office using the Department Contact information below to obtain updated information on our current Bakken related cases, or to inquire or report on investment offerings in which you have concerns.
Real Estate Development Investments
Real Estate Development Investments are currently the Department’s highest related call volume pertaining to investment opportunities in the Bakken. We have received inquiries regarding real estate investment offerings made by U.S. companies, as well as foreign entities and individuals. These companies are responding to a well-publicized need for housing, hotels, and general services in the western part of the state. Most of the inquiries the Department receives regarding Bakken investment opportunities pertain to Real Estate Development Investments. We have received inquiries regarding real estate investment offerings made by U.S. companies, as well as foreign entities and individuals. These companies are responding to a well-publicized need… Others, however, have been uncooperative with our information requests making it difficult to determine the legitimacy of the business.
Because a number of these companies and the investors they are soliciting reside outside North Dakota and the United States, it may place them beyond the jurisdiction of the North Dakota Securities Department, regardless of the location of the real estate being developed. Based on our investigations thus far, none of the entities inquired upon have submitted any type of securities registration filings in the state of North Dakota, with other state securities regulators, or with the U.S. Securities and Exchange Commission. The Department encourages investors to be thorough in conducting their own due diligence, including contacting the securities regulator in their home jurisdiction.
Private Oil and Gas Investment Offerings
Private Oil and Gas Investment Offerings are another subject of frequent investor inquiry received by the Department. Here again, extensive media coverage of the success of oil development in western North Dakota may fuel financial criminals’ attempts to exploit the Bakken. Scammers may push investments in companies that don’t exist, oil well drilling programs and leases that don’t exist, and/or push investments in actual wells and leases in which they do not have a legitimate interest.
Fraudulent oil and gas deals are frequently structured with the limited partnership (or other legal entity) in one state, the operation and physical presence of the oil field in a second state, and the offering made to prospective investors in a third location. Thus there is less chance of an investor dropping by a well site or a nonexistent company headquarters. Such a structure can also make it difficult for law enforcement officials and victims to identify and expose the fraud. In keeping with this typical structure, most of the inquiries the Department receives pertain to companies outside North Dakota soliciting investors outside North Dakota about a Bakken investment opportunity. Once again, the Department’s jurisdiction may be limited and we encourage investors to be thorough in conducting their own due diligence, including contacting the securities regulator in their home jurisdiction.
Before providing any information and/or money to someone promoting an investment opportunity, protect yourself by learning the Red Flags of Fraud, gathering information from the promoter by using the Investor Checklist: How to Avoid Being Swindled, and contacting your state securities regulator (NASAA States LIst) or the federal securities regulator (SEC). The North Dakota Securities Department can provide assistance to you in conducting your due diligence, and even if it appears to be a promoter outside the Department’s jurisdiction, the Department may still be able to assist you by providing any information about the promoter that the Department may have, or by providing contact information for the appropriate regulatory agency that can assist you further.