Former oil company president sentenced in connection to stock manipulation scheme

Former oil company president sentenced in connection to stock manipulation scheme Photo: U.S. Attorney's Office

December 11, 2018 02:52 PM

The United States Attorney's Office in Minnesota has announced that Ryan Randall Gilbertson, the founder of oil company Dakota Plains Holdings, Inc., has been sentenced to 144 months in federal prison, as well as being ordered to pay a $2 million fine and over $15 million in restitution.

A release Tuesday said Gilbertson, 42, and co-defendant Douglas Vaughn Hoskins, 50, were convicted by a federal jury of multiple counts of wire fraud, securities fraud and conspiracy to commit securities fraud in June. Hoskins is scheduled to be sentenced on Dec. 21.

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Authorities alleged that Gilbertson and his business partner founded Dakota Plains, Inc. in 2008. The privately-held company based in Wayzata owned and operated a transloading facility in New Town, North Dakota.

The release alleges that Gilbertson and his partner concealed their involvement in the company by installing their fathers as the company's executives and two-person board of directors. And that he caused the company to issue $9 million in promissory notes to himself and other "corporate insiders."

The notes reportedly paid 12 percent annual interest and included a provision that paid Gilbertson and the other noteholders a bonus based on the average trading price of the company's stock during the first 20 days of public training. Authorities allege Gilbertson then caused the company to go public via a reverse merger with a publicly traded shell company that operated a single defunct tanning salon in suburban Salt Lake City.

A secret condition of the reverse merger was alleged to be that Hoskins would be able to purchase the majority of the 'float' of freely trading shares. Gilbertson then allegedly gave $30,000 to Hoskins, who was reported to be deeply in debt, to purchase 50,000 shares of Dakota Plains stock at a price of 50 cents per share on March 23, 2012 - the morning of the reverse merger.

That same day, Hoskins reportedly began selling his shares at a fraudulently inflated price of $12 per share.

Throughout a 20-day period following the reverse merger, authorities allege Gilbertson, Hoskins and others manipulated the price of Dakota Plains stock to increase the average trading price to $11.30 per share, triggering a $32.8 million bonus payment to Gilbertson and the other noteholders.

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Frank Rajkowski

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