The stock of New Era Energy & Digital (Nasdaq:NUAI) took a sharp dive on Monday, falling over 41%, and continued to slide by a further 8.9% during after-hours trading, following a lawsuit filed by New Mexico's Attorney General against CEO Everett Willard Gray and two associates. The lawsuit alleges their involvement in a fraudulent scheme centred on oil and gas wells in the state.
According to the complaint lodged in the First Judicial District Court, Gray and his associates allegedly profited significantly from New Mexico's fossil fuel wells through a series of shell companies, all while deliberately ignoring environmental regulations. The lawsuit claims that these individuals used multiple shell entities to avoid plugging inactive wells, creating serious environmental hazards such as methane leaks and soil contamination.
The legal action seeks civil penalties and restrictions on the defendants' ability to operate in New Mexico until they undertake proper remediation of the wells. The Attorney General emphasised that this case is not only about environmental enforcement but also reveals a pattern of fraudulent transfers, false statements to regulators, and strategic bankruptcies designed to evade accountability.
A Fraud on the State
The Attorney General described the scheme as a calculated effort by Gray to siphon off revenues from hundreds of oil and gas wells in New Mexico. The lawsuit alleges that Gray transferred wells between related entities, sold wells to himself and his affiliates, and deliberately placed liability-heavy firms into bankruptcy to dodge the costs of plugging and environmental remediation.
Importantly, the lawsuit states that these bankruptcies were not accidental. When faced with regulatory pressure, the defendants allegedly left the shell companies underfunded and insolvent, leaving the state to bear the costs of plugging the wells once they ceased production. Under New Mexico law, operators are responsible for plugging and remediating wells at the end of their productive life. When operators default, the state typically shoulders an average cost of approximately $163,000 (£120,697) per well.
Gray's control over multiple entities, including being a founder and CEO of the original Remnant companies, a managing member of Solis Partners, and CEO of New Era Energy & Digital, creates a complex web of insider dealings throughout each stage of the alleged asset transfers.
The lawsuit alleges that Gray established Solis Partners in June 2020 'to receive Remnant's best wells,' while simultaneously creating Acacia to take on less productive, marginal, and inactive wells—wells that, according to the complaint, were deliberately left unable to meet environmental obligations.
Clash with New Era's Data Centre Strategy
This legal action comes shortly after a report from short-seller Fuzzy Panda, which criticised New Era Energy, claiming Gray has a history of failed penny stocks. The report also claimed that Gray rebranded the company from New Era Helium and added 'AI' to its profile after initial efforts to extract helium from natural gas wells proved unsuccessful.
The timing of the lawsuit coincides with New Era's ambitions to develop a large AI data centre in Lea County. The company has heavily promoted New Mexico as a key growth hub, recently highlighting a land option covering 3,500 acres for a multi-gigawatt AI data centre linked to natural gas and nuclear power initiatives.
However, serious questions arise about the company's reliance on gas wells as its primary revenue source, especially as plaintiffs seek an injunction to prevent the company and its senior leadership from operating in the state. Such legal actions pose a direct threat to New Era's current operations and future expansion plans.
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