SEC v. DONALD G. BLAKSTAD; ENERGY SOURCES INTERNATIONAL CORPORATION; and XACT HOLDINGS CORPORATION, No. 1:20-cv-00163, Southern District of New York (Jan. 8, 2020) — Complaint

Christopher R. Kelly
Jennifer C. Barry*
Brendan P. McGlynn*
Patricia A. Paw*
SECURITIES AND EXCHANGE COMMISSION
Philadelphia Regional Office
1617 JFK Boulevard, Suite 520
Philadelphia, PA  19103
[email protected]
*Not admitted in the U.S. District Court for the Southern District of New York

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,

    Plaintiff,

   v.

DONALD G. BLAKSTAD, ENERGY
SOURCES INTERNATIONAL
CORPORATION, and XACT
HOLDINGS CORPORATION,

                                                Defendants.

20-CV-163

COMPLAINT

JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (the “Commission”) files this Complaint
against defendants Donald G. Blakstad (“Blakstad”), Energy Sources International Corporation
(“ESI”), and Xact Holdings Corporation (“Xact Holdings” and, collectively with Blakstad and
ESI, “Defendants”) and alleges as follows:
SUMMARY

1. This matter involves an offering fraud orchestrated by Blakstad in which he raised
approximately $3.544 million from at least 14 investors through the fraudulent offer and sale of
securities in three companies he owned and controlled.  Instead of investing as promised,

2
 
Blakstad used the majority of investor proceeds for his personal benefit, including spending
funds on personal entertainment, the purchase of a stake in a nightclub, the purchase of a luxury
automobile, and to fund illicit securities trading.
2. Between at least July 2015 and May 2019, Blakstad raised funds through (1)
Midcontinental Petroleum, Inc. (“Midcontinental”), a purported oil, gas, and alternative energy
resources company; (2) ESI, a purported cryptocurrency mining operation; and (3) Xact
Holdings, a company formed to acquire a Canadian manufacturer of industrial vehicle
components (“Canadian Company”).
3. Defendants induced investors to purchase securities in these companies by
making a number of materially false and misleading statements and omissions concerning the
use of investor proceeds and the business operations of Midcontinental.
4. With respect to Midcontinental, Blakstad told investors that their money would be
used to fund start-up and other costs related to oil, gas, and alternative energy exploration,
including the acquisition of land leases and other equipment needed for energy exploration,
extraction, and storage.  In connection with ESI, Blakstad and ESI told investors that their funds
would be used to purchase equipment and cover “start-up costs” for ESI’s purported
cryptocurrency mining operations.  And for Xact Holdings, Blakstad and Xact Holdings told
investors that their funds would be used to acquire Canadian Company and to lease facilities in
Houston, Texas.  Each of these representations was false.
5. Rather than using the investor funds as stated, Blakstad treated the funds in the
company bank accounts as his own personal piggybank.
6. In addition, Blakstad used investor funds to make payments to Individual 1, who
introduced certain investors to Blakstad or otherwise solicited investments for him.

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7. By engaging in the conduct described in this Complaint, Defendants violated, and
unless enjoined will continue to violate, Section 17(a) of the Securities Act of 1933 (“Securities
Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange
Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
JURISDICTION AND VENUE
8. The Commission brings this action pursuant to Sections 20(b) and 20(d) of the
Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange
Act [15 U.S.C. §§ 78u(d) and 78u(e)] to enjoin such acts, transactions, practices, and courses of
business and to obtain disgorgement, prejudgment interest, civil money penalties, an officer-and-
director bar against Blakstad, and such other and further relief as the Court may deem just and
appropriate.
9. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and
22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Sections 21(d), 21(e),
and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
10. Venue in this district is proper pursuant to Section 22(a) of the Securities Act [15
U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].  Among other things,
certain of the acts, practices, and courses of business constituting the violations of the federal
securities laws alleged herein occurred within the Southern District of New York.
DEFENDANTS
11. Blakstad, age 60, is a resident of San Diego, California and Las Vegas, Nevada.
Blakstad owns, controls, and holds executive officer positions in Midcontinental, ESI, and Xact
Holdings.  From July 2009 until at least October 2010, Blakstad served as Chairman of the Board
of Wind Energy America, Inc., which at that time was a publicly-held, Minnesota-based

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company that purportedly owned and operated wind turbines.  In July 2019, Blakstad was
charged both civilly by the Securities and Exchange Commission and criminally by the United
States Department of Justice with insider trading in the securities of Illumina, Inc.
12. Energy Sources International Corporation was first incorporated in Nevada in
August 2015, and Blakstad is its President and sole employee.  ESI purports to operate a
cryptocurrency mining data center located in Las Vegas, Nevada.
13. Xact Holdings Corporation was incorporated in Delaware in September 2018,
and Blakstad is its Chief Executive Officer and sole employee.  Xact Holdings was formed to
acquire Canadian Company, a manufacturer of industrial vehicle components.
OTHER RELEVANT ENTITY
14. Midcontinental Petroleum, Inc. was incorporated in Nevada in March 2014 and
lists its principle place of business in Las Vegas, Nevada.  Blakstad founded Midcontinental, is
its Chief Executive Officer and a director, and is its sole employee.  Midcontinental purports to
be in the business of investing in the energy industry through the purchase of land and assets
used for oil, gas, and alternative energy production and for electric energy storage.
FACTS

Background

15. From July 2015 through May 2019, Blakstad directly or indirectly raised
approximately $3.544 million from at least 14 investors through the fraudulent offer and sale of
securities in three companies he owned and controlled:  (1) Midcontinental; (2) ESI; and (3) Xact
Holdings.
16. These entities were fledgling companies at best with little to no actual business
operations and few concrete prospects for profitable operations.

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Midcontinental Offering Fraud

17. Between July 2015 and August 2018, Blakstad directly or indirectly sold
securities in Midcontinental to at least seven individuals for a total of approximately $1.469
million.
18. Blakstad solicited investors during in person meetings, on the telephone, through
email, or indirectly through Individual 1.
19. Blakstad made oral representations and used written materials with certain
investors, including a Midcontinental Private Placement Memorandum (the “PPM”) and
pamphlets that summarized specific investment projects containing detailed financial
information and anticipated profitability (the “Pamphlets”).  Among other things, Blakstad
falsely told certain investors that their investment in Midcontinental would be used to fund start-
up and other costs related to oil, gas, and alternative energy exploration, including the acquisition
of land leases and other equipment needed for energy exploration, extraction, and storage.
20. The PPM, which Blakstad provided to several prospective investors by email,
disclosed that Midcontinental was issuing investment units (the “Investment Units”) in
Midcontinental that consisted of a $10,000 convertible debenture (the “Debenture”) and 10,000
common stock purchase warrants (the “Warrants”).
21. The PPM stated that the Debentures, which had three-year terms, were
convertible at any time into common stock and bore annual interest of 6% payable in cash or
common stock.  Midcontinental had the option of satisfying the Debentures at expiration with
payment in cash or issuance of common stock.

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22. According to the PPM, Midcontinental’s mission and business strategy was
designed to create a diversified portfolio of oil and gas properties and other energy-related
investments, including solar power and electricity energy storage.
23. The PPM also stated that investor proceeds would be used to acquire oil and gas
interests and energy storage investments, and that a small percentage of investor funds would be
kept available for administrative and other working capital purposes, including making quarterly
interest payments on the Debentures.
24. The Pamphlets that Blakstad distributed contained, among other things, financial
projections that identified earnings from specific energy projects; however, Blakstad and
Midcontinental had no agreements to participate in these projects, and expended little to no
money to participate in these projects.
25. For example, in February 2016, Blakstad sent one investor financial projections
for a compressed air energy storage project.  The financial summary estimated total energy
revenue and operating cash flow of $447.5 million and $327.5 million, respectively, over the
project’s 20-year lifespan.  Blakstad did not use investor proceeds on this purported air energy
storage project.
26. In June 2018, Blakstad sent another investor a series of documents and financial
projections for a different alternative energy project:  a massive solar farm project to be
constructed in the Mojave Desert.  Blakstad’s financial projections estimated cumulative energy
sales and green energy credits of $299.4 million and operating cash flow of $277.8 million over
the solar farm’s 25-year lifespan.  Blakstad estimated the project’s return on investment at 32.9%
and expected a full “payback” on its $71.8 million equity investment in less than two years.
Again, Blakstad did not use investor proceeds on this purported alternative energy project.

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27. Blakstad deposited investor checks or otherwise received investor money from
wire transfers into a Midcontinental bank account that he controlled.
28. Blakstad did not use the vast majority of investor proceeds in a manner consistent
with the PPM and did not otherwise conduct any business arguably associated with oil, gas, or
other energy exploration business.
29. Blakstad used at least $1.2 million, or 82 percent, of the more than $1.4 million
raised for Midcontinental for his personal benefit.
30. For example, Blakstad used Midcontinental investment money to pay for:
entertainment, including hotels, travel, and restaurants; a minority interest in a night club; and
other personal expenses, including a Mercedes Benz.  Blakstad also used $110,000 of the funds
to purchase Illumina securities in October 2016—which, among other trades, is the subject of the
Securities and Exchange Commission’s and United States Department of Justice’s insider trading
cases against him—and withdrew a significant amount in cash.
ESI Offering Fraud

31. Between December 2017 and May 2018, Blakstad and ESI directly or indirectly
sold securities in ESI to at least five individuals for a total of approximately $550,000.
32. Blakstad and ESI told prospective investors that ESI was a business involved in
cryptocurrency mining, and would use investor funds to purchase equipment and cover “start-up
costs.”
33. Blakstad, in his capacity as ESI’s president, sent an email to prospective investors
representing that ESI had “developed a world-class data center for crypto currency mining.”
Blakstad’s email stated that the mining operation “offer(s) a unique opportunity for people
looking to make large investments in the crypto currency mining space.”  It further stated that

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“we offer investors the ability to purchase the mining equipment and lease back to ESI.  Or to
make an equity investment in the Company.”
34. After receiving investor funds from the sale of ESI securities, Blakstad deposited
the money into an ESI bank account that he controlled.
35. Blakstad used at least $270,000 of the ESI investors’ funds for his personal
expenditures, which included cash withdrawals, hotel, casino and restaurant expenses, and
payments for other personal items.
36. Additionally, although ESI was not profitable, Blakstad and ESI issued nearly
$60,000 in checks to investors as a purported return on their investments.
Xact Holdings Offering Fraud

37. Between October 2018 and May 2019, Blakstad and Xact Holdings directly or
indirectly sold securities in Xact Holdings to at least four investors for a total of approximately
$1.525 million.
38. In 2018, Blakstad and Xact Holdings entered into discussions to purchase
Canadian Company, which claimed to be involved in supplying equipment for vehicles and
machines used by the U.S. military and the oil industry.
39. In September 2018, Blakstad formed Xact Holdings, and they began soliciting
investors to fund its purported business plan to purchase Canadian Company.
40. Blakstad, acting as Xact Holdings’ CEO, represented in telephone and email
contact with prospective investors that investor funds would be used to acquire Canadian
Company and to lease facilities in Houston, Texas.

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41. Blakstad and Xact Holdings told at least one prospective investor that either Xact
Holdings or Canadian Company recently signed a large contract worth $9 million with an
unknown party.
42. One individual, who collectively invested $500,000 on October 22, 2018, and
May 21, 2019, entered into an agreement with Blakstad that confirmed his investment in Xact
Holdings and stated that invested funds would be used to “help expand and grow the company in
Houston Tx.”  This agreement also gave the investor the option to make a future additional
investment in the company.
43. The Xact Holdings investor funds were comingled into a bank account in the
name of Xact Holdings and controlled by Blakstad.
44. In March 2019, Blakstad and Xact Holdings entered into an agreement to
purchase Canadian Company for $10 million, and immediately thereafter used investor funds to
make the initial payment of $750,000 to Canadian Company.
45. Blakstad and Xact Holdings raised an additional $775,000 of investor funds after
March 2019, but used nearly $700,000 of those funds for Blakstad’s personal benefit instead of
using the money consistent with his representations to investors.  Specifically, Blakstad spent
money on hotels, restaurants, shopping sprees, personal credit card payments, and withdrew
significant amounts of cash.
Defendants Violated the Federal Securities Laws
46. At all relevant times, Blakstad owned, operated, and controlled Midcontinental,
ESI, and Xact Holdings.
47. The investments in Midcontinental, ESI, and Xact Holdings offered and sold by
Defendant were securities within the meaning of the Securities Act and Exchange Act.

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48. The investments in Midcontinental, ESI, and Xact Holdings were all in a common
enterprise run by Blakstad, with the expectation of profits to be derived solely from his efforts.
49. Investors played no role in the management or operations of the businesses of
Midcontinental, ESI, or Xact Holdings.
50. Investors provided Blakstad with money—between at least July 2015 and May
2019, approximately 14 investors gave Blakstad approximately $3.544 million.
51. Investors made their investment with a reasonable expectation of profits to be
derived solely from Blakstad’s alleged ability to generate profits without any participation by
any of its investors.
52. Blakstad and ESI engaged in the offer and sale of the securities of ESI by use of
the means or instruments of transportation or communication in interstate commerce, the
instrumentalities of interstate commerce, and/or by use of the mails.
53. Blakstad and Xact Holdings engaged in the offer and sale of the securities of Xact
Holdings by use of the means or instruments of transportation or communication in interstate
commerce, the instrumentalities of interstate commerce, and/or by use of the mails.
54. Directly or indirectly, Defendants made materially false and misleading
statements and omissions concerning the use of investor proceeds, and Blakstad made materially
false and misleading statements and omissions concerning the business operations of
Midcontinental.
55. Defendants, directly or indirectly, knowingly or recklessly made material untrue
statements and omitted to state material facts necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.

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56. A reasonable investor would consider the misrepresented facts and omitted
information described herein—including, among other information, misrepresentations and
omissions regarding the business operations of Midcontinental and Blakstad’s use of investors’
money to pay for his personal expenses—important in deciding whether or not to purchase the
securities.
57. The untrue statements of material fact and material omissions described herein
were made in the offer or sale and in connection with the purchase or sale of securities.
58. In connection with the conduct described herein, Defendants acted knowingly or
recklessly.  Defendants knew or was reckless in not knowing that Defendants were making
material misrepresentations and omitting to state material facts necessary to make certain
statements not misleading under the circumstances.
FIRST CLAIM FOR RELIEF
(Violations of Section 17(a) of the Securities Act)

59. The Commission realleges and incorporates by reference each and every
allegation in paragraphs 1 through 58, inclusive, as if they were fully set forth herein.
60. By engaging in the conduct described above, Defendants knowingly or recklessly,
in the offer or sale of securities, directly or indirectly, by the use of means or instruments of
transportation or communication in interstate commerce or by use of the mails:
a. employed devices, schemes, or artifices to defraud;
b. obtained money or property by means of untrue statements of material fact
or omissions to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading; and/or
c. engaged in transactions, practices, or courses of business which operated or

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would operate as a fraud or deceit upon purchasers of securities.
61. By engaging in the foregoing conduct, Defendants violated and, unless enjoined,
will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
SECOND CLAIM FOR RELIEF
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder)

62. The Commission realleges and incorporates by reference each and every
allegation in paragraphs 1 through 58, inclusive, as if they were fully set forth herein.
63. By engaging in the conduct described above, Defendants knowingly or recklessly,
in connection with the purchase or sale of securities, directly or indirectly, by use of the means or
instrumentalities of interstate commerce or of the mails or of any facility of a national securities
exchange:
a. employed devices, schemes, or artifices to defraud;
b. made untrue statements of material fact, or omitted to state material facts
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
c. engaged in acts, practices, or courses of business which operated or would
operate as a fraud or deceit upon any person in connection with the
purchase or sale of any security.
64. By engaging in the foregoing conduct, Defendants violated and, unless enjoined,
will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5].
 

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PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a final
judgment:
I.
Permanently restraining and enjoining Defendants from, directly or indirectly, violating
Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15
U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5];
II.
 Ordering Defendants to disgorge all ill-gotten gains or unjust enrichment derived from
the activities set forth in this Complaint, together with prejudgment interest thereon;
III.
 Ordering Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act
[15 U.S.C. § 77t(d)] and/or Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78(u)(d)(3)];
IV.
 Prohibiting Blakstad from acting as an officer or director of any issuer that has a class of
securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is
required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)]
pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and

Christopher R. Kelly 
Jennifer C. Barry* 
Brendan P. McGlynn* 
Patricia A. Paw* 
SECURITIES AND EXCHANGE COMMISSION 
Philadelphia Regional Office 
1617 JFK Boulevard, Suite 520 
Philadelphia, PA  19103 
[email protected] 
*Not admitted in the U.S. District Court for the Southern District of New York 

 
UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 
 

 
SECURITIES AND EXCHANGE 
COMMISSION, 
 
    Plaintiff, 
 
   v. 
 
DONALD G. BLAKSTAD, ENERGY 
SOURCES INTERNATIONAL 
CORPORATION, and XACT 
HOLDINGS CORPORATION, 
 
    Defendants. 
 
 

 
 
20-CV-163 
 
 
 
COMPLAINT 
 
JURY TRIAL DEMANDED 

 
Plaintiff Securities and Exchange Commission (the “Commission”) files this Complaint 

against defendants Donald G. Blakstad (“Blakstad”), Energy Sources International Corporation 

(“ESI”), and Xact Holdings Corporation (“Xact Holdings” and, collectively with Blakstad and 

ESI, “Defendants”) and alleges as follows: 

SUMMARY 
 
1. This matter involves an offering fraud orchestrated by Blakstad in which he raised 

approximately $3.544 million from at least 14 investors through the fraudulent offer and sale of 

securities in three companies he owned and controlled.  Instead of investing as promised, 

Case 1:20-cv-00163   Document 1   Filed 01/08/20   Page 1 of 14



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Blakstad used the majority of investor proceeds for his personal benefit, including spending 

funds on personal entertainment, the purchase of a stake in a nightclub, the purchase of a luxury 

automobile, and to fund illicit securities trading.     

2. Between at least July 2015 and May 2019, Blakstad raised funds through (1) 

Midcontinental Petroleum, Inc. (“Midcontinental”), a purported oil, gas, and alternative energy 

resources company; (2) ESI, a purported cryptocurrency mining operation; and (3) Xact 

Holdings, a company formed to acquire a Canadian manufacturer of industrial vehicle 

components (“Canadian Company”).   

3. Defendants induced investors to purchase securities in these companies by 

making a number of materially false and misleading statements and omissions concerning the 

use of investor proceeds and the business operations of Midcontinental. 

4. With respect to Midcontinental, Blakstad told investors that their money would be 

used to fund start-up and other costs related to oil, gas, and alternative energy exploration, 

including the acquisition of land leases and other equipment needed for energy exploration, 

extraction, and storage.  In connection with ESI, Blakstad and ESI told investors that their funds 

would be used to purchase equipment and cover “start-up costs” for ESI’s purported 

cryptocurrency mining operations.  And for Xact Holdings, Blakstad and Xact Holdings told 

investors that their funds would be used to acquire Canadian Company and to lease facilities in 

Houston, Texas.  Each of these representations was false. 

5. Rather than using the investor funds as stated, Blakstad treated the funds in the 

company bank accounts as his own personal piggybank.   

6. In addition, Blakstad used investor funds to make payments to Individual 1, who 

introduced certain investors to Blakstad or otherwise solicited investments for him. 

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7. By engaging in the conduct described in this Complaint, Defendants violated, and 

unless enjoined will continue to violate, Section 17(a) of the Securities Act of 1933 (“Securities 

Act”) [15 U.S.C. § 77q(a)] and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange 

Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

JURISDICTION AND VENUE 

8. The Commission brings this action pursuant to Sections 20(b) and 20(d) of the 

Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and Sections 21(d) and 21(e) of the Exchange 

Act [15 U.S.C. §§ 78u(d) and 78u(e)] to enjoin such acts, transactions, practices, and courses of 

business and to obtain disgorgement, prejudgment interest, civil money penalties, an officer-and-

director bar against Blakstad, and such other and further relief as the Court may deem just and 

appropriate.   

9. This Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 

22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Sections 21(d), 21(e), 

and 27 of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].   

10. Venue in this district is proper pursuant to Section 22(a) of the Securities Act [15 

U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. § 78aa].  Among other things, 

certain of the acts, practices, and courses of business constituting the violations of the federal 

securities laws alleged herein occurred within the Southern District of New York. 

DEFENDANTS 

11. Blakstad, age 60, is a resident of San Diego, California and Las Vegas, Nevada.  

Blakstad owns, controls, and holds executive officer positions in Midcontinental, ESI, and Xact 

Holdings.  From July 2009 until at least October 2010, Blakstad served as Chairman of the Board 

of Wind Energy America, Inc., which at that time was a publicly-held, Minnesota-based 

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company that purportedly owned and operated wind turbines.  In July 2019, Blakstad was 

charged both civilly by the Securities and Exchange Commission and criminally by the United 

States Department of Justice with insider trading in the securities of Illumina, Inc.   

12. Energy Sources International Corporation was first incorporated in Nevada in 

August 2015, and Blakstad is its President and sole employee.  ESI purports to operate a 

cryptocurrency mining data center located in Las Vegas, Nevada.   

13. Xact Holdings Corporation was incorporated in Delaware in September 2018, 

and Blakstad is its Chief Executive Officer and sole employee.  Xact Holdings was formed to 

acquire Canadian Company, a manufacturer of industrial vehicle components. 

OTHER RELEVANT ENTITY 

14. Midcontinental Petroleum, Inc. was incorporated in Nevada in March 2014 and 

lists its principle place of business in Las Vegas, Nevada.  Blakstad founded Midcontinental, is 

its Chief Executive Officer and a director, and is its sole employee.  Midcontinental purports to 

be in the business of investing in the energy industry through the purchase of land and assets 

used for oil, gas, and alternative energy production and for electric energy storage. 

FACTS 
 

Background 
 

15. From July 2015 through May 2019, Blakstad directly or indirectly raised 

approximately $3.544 million from at least 14 investors through the fraudulent offer and sale of 

securities in three companies he owned and controlled:  (1) Midcontinental; (2) ESI; and (3) Xact 

Holdings.   

16. These entities were fledgling companies at best with little to no actual business 

operations and few concrete prospects for profitable operations. 

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Midcontinental Offering Fraud 
 

17. Between July 2015 and August 2018, Blakstad directly or indirectly sold 

securities in Midcontinental to at least seven individuals for a total of approximately $1.469 

million.  

18. Blakstad solicited investors during in person meetings, on the telephone, through 

email, or indirectly through Individual 1.  

19. Blakstad made oral representations and used written materials with certain 

investors, including a Midcontinental Private Placement Memorandum (the “PPM”) and 

pamphlets that summarized specific investment projects containing detailed financial 

information and anticipated profitability (the “Pamphlets”).  Among other things, Blakstad 

falsely told certain investors that their investment in Midcontinental would be used to fund start-

up and other costs related to oil, gas, and alternative energy exploration, including the acquisition 

of land leases and other equipment needed for energy exploration, extraction, and storage.   

20. The PPM, which Blakstad provided to several prospective investors by email, 

disclosed that Midcontinental was issuing investment units (the “Investment Units”) in 

Midcontinental that consisted of a $10,000 convertible debenture (the “Debenture”) and 10,000 

common stock purchase warrants (the “Warrants”).   

21. The PPM stated that the Debentures, which had three-year terms, were 

convertible at any time into common stock and bore annual interest of 6% payable in cash or 

common stock.  Midcontinental had the option of satisfying the Debentures at expiration with 

payment in cash or issuance of common stock.   

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22. According to the PPM, Midcontinental’s mission and business strategy was 

designed to create a diversified portfolio of oil and gas properties and other energy-related 

investments, including solar power and electricity energy storage.  

23. The PPM also stated that investor proceeds would be used to acquire oil and gas 

interests and energy storage investments, and that a small percentage of investor funds would be 

kept available for administrative and other working capital purposes, including making quarterly 

interest payments on the Debentures.   

24. The Pamphlets that Blakstad distributed contained, among other things, financial 

projections that identified earnings from specific energy projects; however, Blakstad and 

Midcontinental had no agreements to participate in these projects, and expended little to no 

money to participate in these projects. 

25. For example, in February 2016, Blakstad sent one investor financial projections 

for a compressed air energy storage project.  The financial summary estimated total energy 

revenue and operating cash flow of $447.5 million and $327.5 million, respectively, over the 

project’s 20-year lifespan.  Blakstad did not use investor proceeds on this purported air energy 

storage project.   

26. In June 2018, Blakstad sent another investor a series of documents and financial 

projections for a different alternative energy project:  a massive solar farm project to be 

constructed in the Mojave Desert.  Blakstad’s financial projections estimated cumulative energy 

sales and green energy credits of $299.4 million and operating cash flow of $277.8 million over 

the solar farm’s 25-year lifespan.  Blakstad estimated the project’s return on investment at 32.9% 

and expected a full “payback” on its $71.8 million equity investment in less than two years.  

Again, Blakstad did not use investor proceeds on this purported alternative energy project.   

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27. Blakstad deposited investor checks or otherwise received investor money from 

wire transfers into a Midcontinental bank account that he controlled.  

28. Blakstad did not use the vast majority of investor proceeds in a manner consistent 

with the PPM and did not otherwise conduct any business arguably associated with oil, gas, or 

other energy exploration business.  

29. Blakstad used at least $1.2 million, or 82 percent, of the more than $1.4 million 

raised for Midcontinental for his personal benefit.   

30. For example, Blakstad used Midcontinental investment money to pay for:  

entertainment, including hotels, travel, and restaurants; a minority interest in a night club; and 

other personal expenses, including a Mercedes Benz.  Blakstad also used $110,000 of the funds 

to purchase Illumina securities in October 2016—which, among other trades, is the subject of the 

Securities and Exchange Commission’s and United States Department of Justice’s insider trading 

cases against him—and withdrew a significant amount in cash. 

ESI Offering Fraud 
 

31. Between December 2017 and May 2018, Blakstad and ESI directly or indirectly 

sold securities in ESI to at least five individuals for a total of approximately $550,000.   

32. Blakstad and ESI told prospective investors that ESI was a business involved in 

cryptocurrency mining, and would use investor funds to purchase equipment and cover “start-up 

costs.”   

33. Blakstad, in his capacity as ESI’s president, sent an email to prospective investors 

representing that ESI had “developed a world-class data center for crypto currency mining.”  

Blakstad’s email stated that the mining operation “offer(s) a unique opportunity for people 

looking to make large investments in the crypto currency mining space.”  It further stated that 

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“we offer investors the ability to purchase the mining equipment and lease back to ESI.  Or to 

make an equity investment in the Company.”    

34. After receiving investor funds from the sale of ESI securities, Blakstad deposited 

the money into an ESI bank account that he controlled.   

35. Blakstad used at least $270,000 of the ESI investors’ funds for his personal 

expenditures, which included cash withdrawals, hotel, casino and restaurant expenses, and 

payments for other personal items.   

36. Additionally, although ESI was not profitable, Blakstad and ESI issued nearly 

$60,000 in checks to investors as a purported return on their investments. 

Xact Holdings Offering Fraud 
 

37. Between October 2018 and May 2019, Blakstad and Xact Holdings directly or 

indirectly sold securities in Xact Holdings to at least four investors for a total of approximately 

$1.525 million.   

38. In 2018, Blakstad and Xact Holdings entered into discussions to purchase 

Canadian Company, which claimed to be involved in supplying equipment for vehicles and 

machines used by the U.S. military and the oil industry.   

39. In September 2018, Blakstad formed Xact Holdings, and they began soliciting 

investors to fund its purported business plan to purchase Canadian Company.   

40. Blakstad, acting as Xact Holdings’ CEO, represented in telephone and email 

contact with prospective investors that investor funds would be used to acquire Canadian 

Company and to lease facilities in Houston, Texas.   

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41. Blakstad and Xact Holdings told at least one prospective investor that either Xact 

Holdings or Canadian Company recently signed a large contract worth $9 million with an 

unknown party. 

42. One individual, who collectively invested $500,000 on October 22, 2018, and 

May 21, 2019, entered into an agreement with Blakstad that confirmed his investment in Xact 

Holdings and stated that invested funds would be used to “help expand and grow the company in 

Houston Tx.”  This agreement also gave the investor the option to make a future additional 

investment in the company.   

43. The Xact Holdings investor funds were comingled into a bank account in the 

name of Xact Holdings and controlled by Blakstad.   

44. In March 2019, Blakstad and Xact Holdings entered into an agreement to 

purchase Canadian Company for $10 million, and immediately thereafter used investor funds to 

make the initial payment of $750,000 to Canadian Company.   

45. Blakstad and Xact Holdings raised an additional $775,000 of investor funds after 

March 2019, but used nearly $700,000 of those funds for Blakstad’s personal benefit instead of 

using the money consistent with his representations to investors.  Specifically, Blakstad spent 

money on hotels, restaurants, shopping sprees, personal credit card payments, and withdrew 

significant amounts of cash.  

Defendants Violated the Federal Securities Laws 

46. At all relevant times, Blakstad owned, operated, and controlled Midcontinental, 

ESI, and Xact Holdings. 

47. The investments in Midcontinental, ESI, and Xact Holdings offered and sold by 

Defendant were securities within the meaning of the Securities Act and Exchange Act. 

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48. The investments in Midcontinental, ESI, and Xact Holdings were all in a common 

enterprise run by Blakstad, with the expectation of profits to be derived solely from his efforts.   

49. Investors played no role in the management or operations of the businesses of 

Midcontinental, ESI, or Xact Holdings.   

50. Investors provided Blakstad with money—between at least July 2015 and May 

2019, approximately 14 investors gave Blakstad approximately $3.544 million. 

51. Investors made their investment with a reasonable expectation of profits to be 

derived solely from Blakstad’s alleged ability to generate profits without any participation by 

any of its investors.  

52. Blakstad and ESI engaged in the offer and sale of the securities of ESI by use of 

the means or instruments of transportation or communication in interstate commerce, the 

instrumentalities of interstate commerce, and/or by use of the mails.  

53. Blakstad and Xact Holdings engaged in the offer and sale of the securities of Xact 

Holdings by use of the means or instruments of transportation or communication in interstate 

commerce, the instrumentalities of interstate commerce, and/or by use of the mails.  

54. Directly or indirectly, Defendants made materially false and misleading 

statements and omissions concerning the use of investor proceeds, and Blakstad made materially 

false and misleading statements and omissions concerning the business operations of 

Midcontinental.   

55. Defendants, directly or indirectly, knowingly or recklessly made material untrue 

statements and omitted to state material facts necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading. 

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56. A reasonable investor would consider the misrepresented facts and omitted 

information described herein—including, among other information, misrepresentations and 

omissions regarding the business operations of Midcontinental and Blakstad’s use of investors’ 

money to pay for his personal expenses—important in deciding whether or not to purchase the 

securities. 

57. The untrue statements of material fact and material omissions described herein 

were made in the offer or sale and in connection with the purchase or sale of securities. 

58. In connection with the conduct described herein, Defendants acted knowingly or 

recklessly.  Defendants knew or was reckless in not knowing that Defendants were making 

material misrepresentations and omitting to state material facts necessary to make certain 

statements not misleading under the circumstances. 

FIRST CLAIM FOR RELIEF 
(Violations of Section 17(a) of the Securities Act) 

 
59. The Commission realleges and incorporates by reference each and every 

allegation in paragraphs 1 through 58, inclusive, as if they were fully set forth herein.  

60. By engaging in the conduct described above, Defendants knowingly or recklessly, 

in the offer or sale of securities, directly or indirectly, by the use of means or instruments of 

transportation or communication in interstate commerce or by use of the mails:   

a. employed devices, schemes, or artifices to defraud; 

b. obtained money or property by means of untrue statements of material fact 

or omissions to state material facts necessary in order to make the 

statements made, in light of the circumstances under which they were 

made, not misleading; and/or 

c. engaged in transactions, practices, or courses of business which operated or 

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would operate as a fraud or deceit upon purchasers of securities.  

61. By engaging in the foregoing conduct, Defendants violated and, unless enjoined, 

will continue to violate Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder) 

 
62. The Commission realleges and incorporates by reference each and every 

allegation in paragraphs 1 through 58, inclusive, as if they were fully set forth herein. 

63. By engaging in the conduct described above, Defendants knowingly or recklessly, 

in connection with the purchase or sale of securities, directly or indirectly, by use of the means or 

instrumentalities of interstate commerce or of the mails or of any facility of a national securities 

exchange: 

a. employed devices, schemes, or artifices to defraud;  

b. made untrue statements of material fact, or omitted to state material facts 

necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; and 

c. engaged in acts, practices, or courses of business which operated or would 

operate as a fraud or deceit upon any person in connection with the 

purchase or sale of any security. 

64. By engaging in the foregoing conduct, Defendants violated and, unless enjoined, 

will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 

thereunder [17 C.F.R. § 240.10b-5].   

 

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PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court enter a final 

judgment: 

I. 

Permanently restraining and enjoining Defendants from, directly or indirectly, violating 

Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the Exchange Act [15 

U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; 

II. 

 Ordering Defendants to disgorge all ill-gotten gains or unjust enrichment derived from 

the activities set forth in this Complaint, together with prejudgment interest thereon; 

III. 

 Ordering Defendants to pay civil penalties pursuant to Section 20(d) of the Securities Act 

[15 U.S.C. § 77t(d)] and/or Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78(u)(d)(3)];  

IV. 

 Prohibiting Blakstad from acting as an officer or director of any issuer that has a class of 

securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is 

required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)] 

pursuant to Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]; and 

 

 

 

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