#56: Part 1: A Story About A $40 Million Dollar Fraud And Its Priceless Lessons For Investors & Entrepreneurs
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Learn More Earn More Business Growth Podcast

Host: Brian Webb

Episode 56: Part 1: A Story About A $40 Million Dollar Fraud And Its Priceless Lessons For Investors & Entrepreneurs

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VALUE BOMBS

What does desperation, patriotism, entrepreneurship, a 40 million loss for investors, concurrent FBI and SEC investigations, and a pending indictment of a friend and former client all have in common? This podcast, this episode, my interview today with Chris Bentley, let's jump into the show.

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HELPFUL LINKS

Burning Bellatorum: The Story of a Forty Million Dollar Fraud and its Priceless Lessons for Investors and Entrepreneurs

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TRANSCRIPT

Brian Webb:

What does desperation, patriotism, entrepreneurship, a 40 million loss for investors, concurrent FBI and SEC investigations, and a pending indictment of a friend and former client all have in common? This podcast, this episode, my interview today with Chris Bentley, let's jump into the show.

This is to Learn More, Earn More Business Growth Podcast.

Brian Webb:

Hey everyone. Welcome to the show. I'm your host, Brian Webb. This podcast is designed to be your number one premier place to learn the framework, secrets and growth hacks to grow and scale your business smarter and faster. While you're working on pursuing your dreams and growing your business, I'll be here to help you make better decisions and avoid costly pitfalls and expensive mistakes along the way. So let's go ahead and jump into today's episode.

Brian Webb:

Hey there, it is a pleasure to have you Chris, Chris Bentley, on the show today. How are you doing this morning, man?

Chris Bentley:

I'm doing well, Brian, thanks for having me on the show.

Brian Webb:

It's a thrill to have you here. The audience doesn't know this yet, but you and I got to know each other as a result of us collaborating together, doing a little bit of marketing work for you back in the day.

Chris Bentley:

Yep, absolutely. Yeah. That was a fun experience.

Brian Webb:

Yeah, yeah, yeah. So for those in the audience who don't know who you are, take a minute or two and just kind of share kind of your background, where your story starts.

Chris Bentley:

Well, I grew up in east Texas, in Tyler, and joined the Marines right after high school and thought I was going to be a lifer. I was in for about 14 and a half years. Got medically discharged for some injuries I incurred while I was in the Marine Corps. Again, that was kind of devastating for me because I thought I was going to be in for life. So I'd done six tours, several to Iraq, several to Afghanistan, and didn't know what I was going to do with my life when I got out. And so I moved to Houston in January of 2014. At that time, oil and gas were trading for over a hundred dollars a barrel. It was pretty easy to get a job in the greater Houston area. So I got a job as a landman down here and got into the oil and gas industry after that and got into some entrepreneurial ventures, buying and selling mineral rights, being the main one, started a business in 2016 that started with just me and my wife and then grew to about 21 employees and over 40 million dollars in assets under management within a few years.

Brian Webb:

Wow. So today is going to be maybe one of the most interesting stories that we've had here, really, on The Learn More Podcast. And so I know that you've got a book that is out, I've got it, it's called Burning Bellatorum, and it's all about the story of a $40 million fraud and it's priceless lessons for investors and entrepreneurs. Tell me, tell the audience how you lost all of your own personal assets and not just the investors' money. It happened for you and the investors, but tell the audience how that story began.

Chris Bentley:

Well, like I said, in 2016, I started the company. At first, it was just doing small deals, brokering deals, buying, when I say small, I mean I think the largest one I bought on my own with my own capital was like $30,000 and I would buy and sell these smaller assets and I saw the opportunity for scale and so in 2017 I brought in one investor, did very well for him. It grew from there and it was an extremely legitimate successful business through the beginning of 2019. And in 2019, keep in mind in 2017 we had started with one investor, that grew to about, I think, six investors toward Q3 of 2017. Then by Q1 of 2018, I think we had like 27 investors. Then later that year it grew to 45. And then by January of 2019, we had about 22.7 million of assets under management and with a hundred investors.

Chris Bentley:

And then later that year, that grew to 28.7 million. And then by the end of the year, we took on, I took on, and this is crucial to the story, I took on 6.6 million dollars in debt. I did that by committing fraud and lying to the bank, but basically, to try to survive I also levered all my own assets, made personal guarantees, got personal loans with my house, and all my personal assets as leverage. So when I turned myself in and everything fell apart, I lost not only all my investors' money but my personal assets as well.

Brian Webb:

Wow. Wow. Wow. Wow. I've known you for some years now and I'm trying to put myself in your shoes because the Chris that I know, you're not a nefarious guy. You've served our country and you did not get into this with the intention of this happening. Talk a little bit more about that slippery slope. I know it started with trying to manage cash flow and things like that but talk about where that started and where that's brought you to today.

Chris Bentley:

Yeah. So I'd say it started with call it like late 2018 or early 2019. But basically, I came back from the Christmas holiday break between 2018 and 2019 where we would always shut down the office for a couple of weeks, about the week of Christmas, and then start the Monday after the New Year's holiday, come back to the office with ready to take on this new fund of 22.7 million dollars in capital commitments from investors, and I learned that we weren't ready from an operational standpoint, meaning like we didn't have the deal flow we normally had, just some little nuance about the business. We would send out letters like literally the day before we left for the Christmas break so that when we come back in January, we were starting to get some deal flow and incoming calls.

Chris Bentley:

And this was crucial to starting off a fund, we always start in January because it was important to kick off the fund with this new deal flow and make these acquisitions at that time of year.

Brian Webb:

Right.

Chris Bentley:

So I come back, there were some problems with the letter and the data sets that fed those offer letters that we would send out. So the first mistake I made, I think was, I was thinking, okay, this isn't a big deal, is what I was telling myself and that we could fix it. So it kind of rallied the troop, so to speak, got all hands on deck, fixed the data, at least I thought I fixed it, with my team, and got a bunch of letters out.

Chris Bentley:

So keep in mind, we also have this cash coming in. I'm simultaneously taking on investor capital, and signing the contracts, which we refer to as the PPMs or private placement memorandums. So I've taken all this capital on and taken the management fee from that capital. And so then fast forward a few weeks later, realized that the letters we had hustled to hurry up and get out, the data that I thought we fixed, we made some serious mistakes. So the deal flow that started coming in was, there was bad deal flow because there were mistakes, the offers were too high in some cases, or they were the incorrect offers for the wrong tracks of the wrong assets. So we would buy these mineral rights properties, and oil and gas royalties. And so sometimes on these offer letters that were incorrect, they would have the wrong properties listed and the wrong owner's names and things of that nature.

Chris Bentley:

So then I'm like, all right, crap, what do I do? I've already taken the management fee. I just made one bad decision after another. So in previous funds, it had always been possible for us to flip these assets quickly and make we promote our share of the profits. Well, because we hadn't bought any assets and we didn't have the ability to flip anything yet for a profit, then what I did was the first thing, I had the management fee to run off of for a couple of months, but then by May, it was starting to run out of that money to cover the overhead. So then what I started doing was, for lack of a better term, committing fraud and altering documents so that I could take a part of the capital and move it into the company and I would make it look like it was in acquisitions. Let's say just for example sake, for a million dollars, when it was really $800,000 and I would move the 200K via various entities and kind of siloing people and employees so nobody would find anything out and I'd get that money back into Bellatorum's operating account and cover the payroll and the rent and all those things to operate the business.

Chris Bentley:

So there I start digging the hole like that. And then in the middle of 2019, the oil and gas industry starts going downhill, big time, with lots of different things going on, political things, prices being depressed, consolidation, not enough new wells being drilled to keep the assets that we did by increasing the value on those assets.

Brian Webb:

Sure.

Chris Bentley:

So then that's when I couldn't flip the assets that we did purchase and because I had already marked them up for all intents and purposes to pull that capital back to the company like I was telling you about just now, so the assets I had purchased in the fund were already didn't have enough margin on them to sell and then their value went down even more with the industry downturn and then keep in mind, we're going into COVID in 2020 and I didn't know that obviously at the end of 2019, but I took on debt from a private lender for 6.6 million dollars in December of 2019 and used the investors' assets, the mineral rights that we owned in the fund as collateral.

Brian Webb:

Right.

Chris Bentley:

And I did not disclose that to the investors. So that per se, wasn't illegal, definitely unethical not to disclose to investors, but I was technically allowed to do that as the general partner. So I do that, but I deceived the lender. I made them think that things were better than they were. I altered documents to make our balance sheet look stronger so that they would approve the loan. So that was the first part in defrauding the lender. And then secondly, they said that I could only use the proceeds for buying new assets. Well, I did buy some new assets with their money, but I also spent a large portion of it on covering overhead.

Chris Bentley:

The final thing I did is, well, I was thinking, all right, this is getting bad. Now fast forward we're 2020, COVID's happening, oil prices fall below zero for a day. I mean, it's just a-

Brian Webb:

Right.

Chris Bentley:

It's a shit show, for lack of better terms, Brian. And so 2020 was just survival mode trying to, I kept doing these fraudulent transactions and having to hide it from everybody and covering it up just to keep the lights on and have an outward appearance that the company was still good.

Chris Bentley:

So I laid a few people off, but not everybody. I didn't want it to look like things were bad at the company because I was out on a campaign to try to raise a more patient capital structure fund. Like this goal, if I could get a hundred million of assets in our management, I thought, okay, and with a long term lockup, like five years, say, then I'd have time to weather any storms and have enough assets on our management to give us enough management fee to cover our overhead. And so that was the goal. I went out trying to raise capital in various avenues. I mean, private investors, institutional investors, overseas debt, just all kinds of different capital structures and just running parallel paths in 2020. And it was just, it was brutal. I mean, nobody wanted to do anything in 2020.

Chris Bentley:

And so I'm out there trying to make it look like, yeah, Bellatorum's great. We have this great track record, which we did in 2017 and 2018. And so my narrative to investors is, Hey, 2019's fun. Don't judge us on it yet because we're in COVID, I haven't had a chance to liquidate all these assets. I'm obviously not telling new investors all this crazy stuff I've been doing behind, all this fraudulent activity I've been doing just to keep the lights on. But again, my thought was, if I could just get a big capital commitment from a huge investor or handful of huge investors, then I could just consolidate everything, get some patience, get enough AUM, move assets around, and just make everybody whole, and then get a longer-term fund where it would give me the ability to trade in and out of assets, get rid of the debt and then acquire new assets with royalty income and other the new capital.

Chris Bentley:

And so anyway, everything was a lie. Things were challenged, to say the least. And the lenders started pushing hard on me for their payment, the note and basically honoring that. They were starting to get suspicious, I would say. And I mean, everything I was doing was like a lie, right? Like, it didn't matter if somebody just said, Hey, how are you doing Chris? Like to say, oh, I'm all right, man. How are you? Just to put a smile on my face and have that outward appearance became a chore. I couldn't sleep. I was getting suicidal. And I just was like, you know what, I can't do this anymore. And I was so close, I'll tell you, Brian, some people have said, man, if you just coulda kept doing what you were doing for maybe a month or two, you would've made it because things were starting.

Chris Bentley:

And I turned myself in April of 2021. I sent the investors an email just saying everything that basically I just told you on April 9th. I think if I would've lasted if I would've kept doing what I was doing for a couple more months. I probably could have gotten that big capital commitment in. I was having so many investor meetings every day, positive ones. Things were starting to look up for the oil and gas industry again. I mean there were prices that were going up, they were back up, I think in April of 2021 they were back up to like mid-sixties. So things were looking up. Some people said you could have just kept doing what you're doing if you would've fought a little longer. I was like, yeah, but man, I really-

Brian Webb:

It was eating you up inside.

Chris Bentley:

It was eating me up bad. And my one thing that I've been going to church a lot and going to Bible study and I, every single Sunday, it was like the message at church or the topic at our Bible study group or both was just like, poking me in the eye saying you can't build something on lies and a lack of integrity. So I thought even if I pulled this off and get a hundred million bucks or 200 million, I mean, it was starting to look like it was like, man, all these people are now coming out of the woodwork and I might end up with 200 million AUM or maybe even more. And that would've been great and I would've been able to commit a few more fraudulent transactions and make everything whole and then be set up, you know?

Chris Bentley:

And I think I still could have made everybody whole and got them a decent return, like the new investors, so it wouldn't have been like a quote-unquote Ponzi scheme where I actually had assets and royalty income and if we just sat on, they bought some new assets, et cetera, I thought, okay, I won't be the rockstar that I was in 2017 and 2018 with the 60% annualized returns, but I might get everybody like 10 to 15% and I'll be all right.

Brian Webb:

Sure.

Chris Bentley:

And then we'll just wind down and everybody will be happy they got their money back plus a return. And then we'll just call it quits with like a soft landing, so to speak.

Brian Webb:

Yeah.

Chris Bentley:

But as I go to the Bible study and sit and just read, and I read a lot and I read a lot of business books and just reading a Shoe Dog from about Nike and by Phil Knight and all these books. And just like, man, I can't do this. I won't be able to live with myself if it's 15, 20 years from now, knowing that I committed all this fraud just to build this company and survive. Doesn't matter, the right thing to do would've been back in 2019 and say, Hey, I'm not ready for your capital. Let's take a pause and let me regroup. I think we were such a new company and I was so worried about failing, that clouded my judgment.

Brian Webb:

For sure. Let me ask you this. One, thank you for sharing that story. I can only imagine what you were going through and for that matter, what you're still going through, but specifically, or especially when you're living in this house of cards, I mean the quintessential house of cards, really. Share with the audience what's going on in your life. Like where are you now? What's happening? Where are you in the process? What's next for Chris Bentley, your family, and the investors?

Brian Webb:

We'll get back to the show in just a moment, but first, a quick word from our sponsor What Box Digital. Did you know that most marketing doesn't work at all? Did you know that most business owners and leaders are making the same mistakes over and over and over again? Like so many others, you are likely tired of relying on hope, which is a failed marketing system. This is when you're spending valuable time and money on marketing, and then hoping it works. You've thrown tons of money towards marketing mistakes and failures, and you wish you could get that money back. When you don't have a reliable system for generating leads and acquiring new customers, then you're doomed to exclusively rely on the loyalty of your existing customers and word of mouth, but it doesn't have to be that way.

Brian Webb:

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Brian Webb:

What's going on in your life? Like, where are you now? What's happening? Where are you in the process? What's next for Chris Bentley, your family, and the investors?

Chris Bentley:

I mean, right now I'm renting the upstairs of my in-law's house for my wife and kids. I'm working at a thrift store that's actually a nonprofit that one of my investors is the owner of and just kind of waiting to see what the charges are going to be. I got a call from my lawyer last week saying that I should be officially indicted any day now. So just waiting to see what that's going to be and what they're going to propose is sentencing and all that. So still don't have any hard facts on that. But I have spoken with the SEC and the FBI and the AUSA several times over the past year and I believe they have concluded their investigation and are just wrapping up the formalities to make those official charges.

Chris Bentley:

Still married. My kids, they're still in school. I don't know how much they comprehend about this whole thing. I have two boys, they're 13 and 11. And I told them that I committed a crime and that I would probably go to jail. I told them that back last April because I didn't know how fast things would move and they just seemed shocked. But I mean, I still don't think they fully comprehend that. So during this time, I wrote a book, as you mentioned at the beginning of the show, and the whole purpose of that book is to try to make restitution. I'm not getting any of the proceeds from that. So I figured at least I could use my time while I'm not incarcerated or while I'm free to try to do something to make some money back for the investors. So my point in this book is 100% to try to make restitution.

Brian Webb:

Sure.

Chris Bentley:

I know selling books is a hard road, but it was the only thing I could think of to try to make a dent, try to make investors, and get them something back.

Brian Webb:

Wow. Well, one, I've got one more question for you, but one, my prayers are with you, your family, the investors, and everyone that's involved. I can't imagine standing in your shoes right now. And again, this is a great story about maybe some poor decision making, but it wasn't like, again, you were this criminal, that you had nefarious intent, you got into a place of desperation. And as we all know, when we're desperate is when we absolutely make our worst decisions. Period. Let me ask you this, this is my final question. If you could tell the audience one thing if you could give them one transformational takeaway from all of this and I'm sure there are many, but if you had to sum them up into one, what would it be?

Chris Bentley:

You know, failure is an option.

Brian Webb:

Wow.

Chris Bentley:

It seems so, yeah, that's, duh, right? But I think for a lot of people that are high achievers or strive to be exceptional, so to speak for lack of better terms, that you think failure's not an option. And I, Brian, I don't want to say I'm blaming the Marine Corps, my childhood, on the decisions I made, but I was definitely raised to achieve.

Brian Webb:

To conquer. Yeah.

Chris Bentley:

And then definitely reinforced in my time in the Marine Corps that failure's not an option. Right? And so I would just say that failure is an option. Any story you read about successful entrepreneurs, the big names out there, Bill Fates, Phil Knight, et cetera, Elon Musk, there's a lot of literature out there and real-life stories to show that there is a way to fail and to make it a positive thing. And I wish that would've been top of my mind. And if I could leave your listeners with anything is to just always keep that in the back of your mind that, hey, you can fail. And there's a book called The Hard Thing About Hard Things by Ben Horowitz, and he talks about you can create soft landings that you can recover from, and those failures can end up being launch pads for new ventures if you do it right.

Brian Webb:

Wow. Well, audience, the book is Burning Bellatorum. You can get it on Amazon. His name is Chris Bentley. Man, Chris, thanks for being here today and sharing your story. It's just, I think it's going to be invaluable for the audience.

Chris Bentley:

Thanks, Brian. I appreciate you having me, and I look forward to staying in touch.

Brian Webb:

I want to share a closing word before we leave today. As I think about what Chris has been through, I can't help, but think of how many times in my life, I would imagine in yours, all of us, we have been desperate and we've made bad decisions. They don't all have the same consequences. Clearly, Chris is facing some real consequences. My prayer, my hope is that restoration and redemption is available for everyone, the investors, Chris, his family, Chris's future, and everyone that's been involved. Some bad decisions were made, but who among us has not made bad decisions? Again, the consequences are higher here and I get that, but it's just a good reminder that when we feel desperate, take a step back, talk to someone, get some wise counsel, a wise friend of mine once said that secrets only grow in the dark and they can eat us alive.

Brian Webb:

So as you're growing your business, as you're leading your organization and you find yourself in that desperate situation, let's learn from Chris. Chris's life, Chris's story can really teach us so much. And by the way, the book, Burning Bellatorum, text 832 324 2432. How you felt about this interview and how it touched your life, that's me, you'll text me directly at 832 324 2432, the first three people that text me about this podcast episode. I'm going to send a free copy of Chris's book. And remember, all of that goes back towards paying back those investors who suffered that loss. Thanks for being with me today.

Brian Webb:

Thanks for joining me today and listening to this episode of the Learn More, Earn More Business Growth Podcast. We can be found on all the major platforms like Apple Podcasts, Google Play, Spotify, Pandora, Stitcher, and even Amazon music. I genuinely hope you enjoyed today's episode, and if you did, I'd be honored if you'd subscribe to the show and leave us a rating in an honest review. I'd love to connect with you on Instagram. You can find me at, @Brian Webb, and the show sponsor What Box Digital can be found at, as you might guess at What Box Digital. You can also find me and What Box Digital on Facebook and LinkedIn with the links in the show notes. This will allow you to stay up to date and never miss out on exciting new announcements, events, special offers, and opportunities and you'll be in the know when we drop a new episode of The Learn More, Earn More Business Growth Podcast. And if you'd like to send me a DM on Instagram to say hello, or share your thoughts on how we can make this podcast even better for you. I'd love to hear from you. Again, thanks for listening. Let's go and grow together. I'll see you on the next episode.

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The Learn More Earn More Business Growth Podcast is sponsored by Whatbox Digital, a marketing and consulting agency in the Greater Houston Metroplex. This podcast is your premier place to learn the frameworks, secrets, and growth hacks to grow and scale your business and revenue smarter and faster.

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