ReconAfrica to cough up N$200m over alleged deception

Canadian oil company Recon­Africa is spending nearly US$1 million (about N$18 million) on a new marketing campaign to promote its Namibia exploration project, just weeks after agreeing to pay a reported US$10,8 million (about N$196 million) to settle two court cases.

The cases involved investor complaints of misleading statements about the project.

The oil company, formally known as Reconnaissance Energy Africa Ltd RECO-X, says it has hired Florida-based FTB Capital Inc to conduct “investor awareness, advertising and marketing activities” on its behalf, including banner ads and paid articles.

The agreement took effect on 18 March – less than three weeks after ReconAfrica announced it had settled two class action suits by investors in Canada and the United States over allegations about its communications in the past.

The company has been drilling for more than three years in Namibia in a region near the Okavango River.

Environmentalists have voiced alarm that the project could threaten elephant migration routes and other sensitive ecological sites.

Three years ago, after an earlier promotional campaign to market its Namibia project, ReconAfrica’s stock soared from pennies to more than $13 apiece on the Toronto Stock Exchange (TSX) Venture Exchange.

Much of the content ReconAfrica paid for was tailored to hook investors into believing the early stage company, which had no proven reserves, was sitting on a treasure trove.


German stock promoter Günther Goldherz compared ReconAfrica’s stock in 2021 to a jackpot-winning lottery ticket.

Today ReconAfrica’s stock trades at about $1,20 a share, a more than 90% decline from its peak.

Canadian securities regulators have promised repeatedly to tighten their oversight of promotional activities by Canadian-listed companies, but market watchers say there is little sign of progress.

Canadian law firm Berger Montague said last month that ReconAfrica has agreed to pay $5,075 million to settle the Canadian class action suit if the agreement wins court approval.

A hearing on the matter is scheduled for next month at the British Columbia Supreme Court.

The plaintiffs in the Canadian suit had alleged that ReconAfrica gave misleading statements about its African oil project, including statements implying it would conduct fracking of unconventional deposits in Namibia, even though the Namibian authorities had never allowed fracking in the past.

In the US class action suit, ReconAfrica agreed to pay US$7,05 million to settle the case, based on similar allegations, according to a US website that monitors court settlements.

In both cases, the company denied the allegations and made no admission of liability.

FTB Capital, the company hired by ReconAfrica for its latest promotional campaign, is registered by Andrew Paul Rudensky, according to Florida corporate records.

In 2018, Canadian stock regulators investigated Rudensky and suspended him for two years for making false and misleading representations to an investment dealer about his personal financial dealings with a client.

The Globe and Mail has contacted ReconAfrica for comment, but the company did not respond to the request for comment.


The Globe in 2020 and 2021 reported extensively on an outbreak of questionable stock promotion campaigns that were causing mayhem in the trading of small resource stocks, including those involving ReconAfrica.

The Canadian Securities Administrators (CSA) subsequently created a market abuse task force in late 2021 to address what it termed a “resurgence of abusive promotional and trading activity.”

CSA is an umbrella group for Canada’s 13 provincial and territorial regulators. As part of that strategy, CSA said it was looking at ways for provincial regulators to work together to clamp down on promotions carried out on social media platforms.

But critics say there’s little evidence that much progress has been made in the years since the CSA task force was launched.

Toronto-based securities lawyer Joseph Groia, who is a former head of enforcement at the Ontario Securities Commission, said he’s seen no measurable improvement in Canadian oversight around abusive stock promotion in the past 15 years.

“I’m seeing really abusive trading stuff going on in the market and nothing is being done about it,” he said.

Groia said prosecuting such cases is extremely difficult, and Canadian regulators seem unwilling to take them on.

“They’re afraid of spending the time and money that’s necessary to go after those kinds of people.”

Canadian regulators, he added, seem to be unable to keep up with changes in the social media landscape.

“It’s a fair question to ask why the regulators haven’t done anything with that company,” Groia said.
– The Globe and Mail

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