Christopher A. Faulkner, known as the “Frack Master,” pleaded guilty on Tuesday to securities fraud, engaging in illegal monetary transactions and tax evasion, according to Erin Nealy Cox, the U.S. attorney for the Northern District of Texas.
Faulkner, 41, admitted that he bilked investors out of millions of dollars and concealed millions more from the Internal Revenue Service.
Faulkner is a former Bedford tech entrepreneur who moved into the oil and gas business and became a vocal advocate of fracking in the past decade. He was frequently quoted in the media as an expert on fracking and the oil industry in publications including The New York Times.
Court documents that were unsealed on Tuesday say that from 2011 to 2016, Faulkner raised more than $71 million from working interest investors, who took on a fixed portion of projected drilling costs in exchange for a share in his oil and gas profits.
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“But in marketing materials distributed to these investors, Faulkner inflated the estimated drilling cost by as much as 800 percent, allowing his three companies — Breitling Energy Corp., Crude Energy, LLC and Patriot Energy, Inc. — to pocket the difference between his projections and the actual cost of the wells,” Nealy Cox said in a news release.
Faulkner also used a geologist who was on his own payroll to prepare “geology reports” for would-be investors that overstated wells’ potential.
“Faulkner routinely oversold shares, then transferred investment funds into comingled accounts, despite promising investors their money would be deposited in a segregated bank account used only to pay for drilling activities,” according to the release.
Over a five-year period, Faulkner also diverted about $23 million that he used for his own travel, professional concierge services, maintenance of multiple residences and at least seven vehicles, including an Aston Martin, a Bentley and a Mercedes Benz. During that time, his companies paid out just $6.2 million to investors, according to the criminal complaint filed in June.
In 2014 Faulkner concealed at least $4.5 million in taxable income from the federal government, failing to file a return or pay income tax, according to the release.
Faulkner was arrested in June 2018 in Los Angeles after the Federal Bureau of Investigation raided his Dallas offices in April 2016. A lawsuit was filed against Faulkner by the Securities and Exchange Commission after the 2016 raid.
He is currently in federal custody at FCI Seagoville, and now faces 12 years in prison and $350,000 in fines. According to the terms of his plea agreement, he will be required to pay restitution to those he defrauded, the release says.