DALLAS (AP) — A musician who defrauded investors by claiming to develop sound wave technology that would revolutionize the oil and gas industry used money he collected to support his “lavish” personal spending habits, federal regulators in Texas allege.
In a lawsuit filed Monday in a federal court in Dallas, the Securities and Exchange Commission says Paul Gilman, a self-described music visionary, raised about $3.3 million from approximately 40 investors across the country, including in Texas, Georgia, New York and California.
Gilman raised funds for two oil and gas ventures and claimed to have developed a “revolutionary technology” that would make oil flow through pipelines more efficiently, among other applications, according to the suit filed on the commission’s behalf. Gilman had no apparent experience in the gas and oil industry, the lawsuit says.
“When investor funds ran low, Gilman raised money from new investors or additional money from previous investors, and then quickly used those funds for his personal benefit as well,” the lawsuit states.
Gilman also raised money for a third company named GilmanSound, which offers audio-engineering services to improve speaker systems in stadiums and arenas, according to the court document.
GilmanSound, which provided services to several Major League Baseball teams, started as a real company but when it failed to perform Gilman lied to investors “about his use of the offering proceeds and misappropriated investor funds,” the lawsuit alleges.
Gilman, GilmanSound and two oil and gas ventures — Oil Migration Group and WaveTech29 — are named as defendants in the suit.
Court records list no attorney for Gilman. Attempts to reach Gilman were not successful Tuesday.
The lawsuit describes Oil Migration Group and WaveTech29 as “sham enterprises.” It states that Gilman told those who invested in the pair of oil and gas ventures that the funds would be used to “test, analyze, independently verify, further develop, and license the sound wave technology for oil and gas industry applications.”
But, according to the court filings, Gilman instead spent a significant part of the funds on non-business items and personal expenses, including travel, luxury hotels, designer clothing, and cash withdrawals at casino ATMs. A news release from the SEC said collected funds were used on “lavish personal spending” in California and Las Vegas.
Gilman also falsely led investors to believe the funds were being used to complete testing and validation, and that “everything was on track” with the sound wave technology, according to the lawsuit.
“Gilman, however, was continuing to spend investor funds for himself, which he never told investors,” the lawsuit states.