Sandlapper Securities LLC as well as Trevor Lee Gordon (chief executive officer) and Jack Charles Bixler (vice-present) were handed down a Decision from Financial Industry Regulatory Authority (FINRA) National Adjudicatory Council which affirmed an Extended Hearing Panel’s findings of Sandlapper, Gordon and Bixler’s fraudulent activities and breach of fiduciary duty with respect to saltwater disposal well interest purchase transactions that affected customers of Sandlapper Securities. In the Matter of Department of Enforcement v. Sandlapper Securities LLC et al. No. 2014041860801 (June 23, 2020).
According to the Decision, Tiburon Saltwater Reclamation Fund I was created by Bixler and Gordon to allow investors to provide capital for the construction and operation of wells. Gordon and Bixler became involved with RBJ – a business that had been constructing and operating disposal wells. The wells were designed to return saltwater byproduct from neighboring oil wells to underground rock formations. The Decision revealed that the Fund was controlled by Bixler and Gordon since they headed TSWR Fund Management LLC – the manager of the Fund. Sandlapper served as the managing broker dealer and placement agent for the Fund. Investors collectively purchased $12,400,000.00 in units.
FINRA stated that the Fund’s investors were not made aware that TSWR Development – a company Gordon and Bixler created to acquire disposal wells from RBJ – would be selling interests to the Fund at prices which far exceeded the prices that they were purchased. The Fund and retail investors were also defrauded through the imposition of excessive markups ranging between 67 and 376 percent. Sandlapper and Gordon did not have an adequate explanation for these excessive charges.
FINRA noted that Sandlapper also failed to create supervision systems and written procedures to address conflicts of interest relating to its involvement in securities offerings. The regulator indicated that Gordon was profiting from the transactions when he was also serving on a committee which was tasked with determining which private placements were appropriate to accept. This meant that Gordon stood to earn a profit from sales when he was also responsible for monitoring the appropriateness of transactions.
FINRA also indicated that Sandlapper’s stockbrokers were permitted to effect sales of the well interests. The regulator noted that stockbrokers were compensated on transactions inappropriately marked as real estate and which were not supervised between 2013 and 2015.
FINRA National Adjudicatory Council affirmed Extended Hearing Panel’s Decision in which Sandlapper was expelled from FINRA membership for committing fraud in violation of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5 as well as FINRA Rules 2010 and 2020. Gordon and Bixler have also been barred from associating with any FINRA members in any capacity based upon findings of their fraudulent activities.