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Sunday, June 14, 2015

A TEXAS LAWYER ADMITS ROLE IN OIL-AND-GAS INVESTMENT SCHEMES

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23282 / June 11, 2015
Securities and Exchange Commission v. Aquaphex Total Water Resources and Gregory Jones, Civil Action No. 4:15-cv-00438-A, (NDTX, filed June 10, 2015)
Texas Lawyer Admits to Conducting Fraudulent Offering

On June 10, 2015, the Securities and Exchange Commission ("Commission") filed a settled civil action against attorney Gregory G. Jones and Aquaphex Total Water Solutions in the United States District Court for the Northern District of Texas, Fort Worth Division. The Commission alleges that Jones and Aquaphex defrauded investors in two separate oil-and-gas investment schemes. In a separately filed Consent, Jones and Aquaphex admitted the underlying facts and consented to the entry of a final judgment, permanently enjoining them from violating the anti-fraud and registration provisions of the federal securities laws.

Jones and Aquaphex admitted that Aquaphex, through its CEO, Jones, raised approximately $645,000 by selling revenue-sharing agreements and other securities issued by Aquaphex. The company purported to recycle fracking water through a filtration process. Among other things, Jones and Aquaphex guaranteed that investors would double their investment even if the planned water-filtration plants underperformed. They also made baseless claims that investors would make returns of more than 115% per year, and that Aquaphex was expected to sell for $21 billion within five years. Separately, in 2009, Jones represented a small group of investors that invested approximately $6 million in an entity called Edwards Exploration. Jones failed to disclose to the investors that Edwards Exploration paid Jones approximately $480,000 from the principal amount invested.

Jones and Aquaphex have agreed to settlements that are subject to court approval. Both defendants admitted the facts underlying the Commission's claims and consented to the entry of a final judgment permanently enjoining them from violating the anti-fraud provisions, specifically Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933 ("Securities Act"), and from violating the registration provisions, specifically Sections 5(a) and (c) of the Securities Act. The Commission's claims for disgorgement, prejudgment interest, and civil penalties are the subject of ongoing litigation.

The SEC's investigation was conducted by Jim Etri of the Fort Worth Regional Office. Timothy McCole will lead the Commission's litigation. The Commission appreciates the assistance of the Federal Bureau of Investigation.