Downhole Energy, LLC and associated parties issued cease and desist order by Colorado Securities Commissioner

DENVER - (Nov. 13, 2018) - Colorado Securities Commissioner Gerald Rome has issued cease and desist orders to respondents Downhole Energy, Inc., manager John Marcus Sherman, and salesperson Kyle Thomason, directing them immediately end all unlicensed, and unregistered sales of securities in the state of Colorado. Downhole Energy, which is located in Garland, Texas, utilized unlicensed representatives and K&T Energy Partners to sell units in oil and gas drilling programs that constituted investment contracts, and were unregistered with the Colorado Division of Securities, part of the Department of Regulatory Agencies (DORA).

And investigation conducted by Division staff found that from approximately March 2014 through August 2017, Downhole and Sherman utilized K&T Energy Partners, a Colorado limited liability company of which Thomason was a member, to sell what they termed “units” of oil and gas drilling programs. Thomason and K&T utilized seminars, email solicitations, and individual meetings to solicit these investments, even though neither company nor individual were licensed to do so in Colorado.

Further, the units, which meet the criteria for investment contracts under the Colorado Securities Act, were neither registered nor exempt from registration with the Division of Securities. The returns on these investments were purportedly to come from the sale of oil and gas produced, and were touted along with the potential tax benefits to investors.

“One of the reasons we caution investors about seminars such as those used to promote and sell these securities is that they can place people in high-pressure situations where they feel compelled to act without conducting proper vetting of an offering,” stated Rome. “If you are pitched an investment opportunity, always take the time to step back and call our office before handing over any money, regardless of how legitimate it may seem. You won’t regret it in the long run.”

In signing the stipulation for consent cease and desist orders, Respondents have neither admitted to nor denied the allegations contained therein. They have agreed to immediately cease and desist all violations of the Colorado Securities Act, and acknowledge that failure to do so may result in further action by the Division.