Litigation Release LR-25697 (Blakstad, et al.)

On April 11, 2023, the United States District Court for the Southern District of New York entered final judgments against Donald G. Blakstad, and Energy Sources International Corporation ("ESI"), which was a purported cryptocurrency mining operation controlled by Blakstad. On December 7, 2022, the Court entered an amended final judgment against Xact Holdings Corporation ("Xact"), a company that also was controlled by Blakstad.

According to the SEC's complaint, between at least July 2015 and May 2019, Blakstad fraudulently raised money from investors through Midcontinental Petroleum, Inc. ("MPI"), a purported oil, gas, and alternative energy resources company, as well as through ESI and Xact. Rather than use investors' funds as represented, the SEC's complaint alleges that Blakstad treated the company bank accounts as his own personal piggybank.

Blakstad was charged criminally by the U.S. Attorney's Office for the Southern District of New York. On June 8, 2021, Blakstad was convicted at trial of: (1) conspiracy to commit securities fraud; (2) securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder; (3) conspiracy to commit wire fraud; (4) wire fraud; and (5) aiding and abetting. Blakstad was sentenced to 36 months of imprisonment; three years of supervised release; criminal forfeiture of $4,518,103; restitution of $669,000; and an assessment of $700.

Blakstad consented to the entry of a judgment that permanently enjoins him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, imposes an officer and director bar, and orders him to pay disgorgement and prejudgment interest relating to each the following aspects of the fraud:

• MPI: Disgorgement of $669,000, plus prejudgment interest of $49,250 (deemed satisfied by orders of restitution and forfeiture in United States v. Blakstad).
  
• ESI: Disgorgement of $108,683, plus prejudgment interest of $9,488 (jointly and severally with ESI).
  
• Xact: Disgorgement of $806,106, plus prejudgment interest of $24,494 (with $640,901 of this obligation deemed satisfied by the order of forfeiture in United States v. Blakstad, resulting in $189,699 remaining to be paid on this obligation).

ESI consented to the entry of a judgment that contains permanent injunctions for the charged antifraud provisions and orders it to pay disgorgement and prejudgment interest jointly and severally with Blakstad as noted above.

Xact consented to the entry of a judgment that ordered disgorgement of $750,000, but deemed that obligation satisfied by the return of Xact investors' respective share of the $750,000, plus accrued interest, previously deposited by a third party in the Court Registry Investment System.

Blakstad also was charged and agreed to settle the insider trading charges against him in Securities and Exchange Commission v. Blakstad, et al., Civil Action No. 1:19-cv-06387 (S.D.N.Y., filed July 10, 2019), as described in the litigation release for that case.

The litigation was led by Christopher R. Kelly and supervised by Gregory R. Bockin of the SEC's Philadelphia Regional Office. The SEC's investigation that led to this action was conducted by Patricia A Paw and Brian R. Higgins, and supervised by Brendan P. McGlynn and Scott A. Thompson, all of the Philadelphia Regional Office.