Federal securities regulators have dropped the hammer on two Minnesota oil industry investors in connection with an alleged stock scheme involving Dakota Plains Holdings.

One founder of Dakota Plains, Ryan Gilbertson, has been accused of multiple violations of federal securities laws in connection with the company's initial public offering in 2012. The other founder, Michael Reger, has settled separate claims against him and agreed to pay nearly $8 million.

In a civil law enforcement action filed Monday in U.S. District Court in Minneapolis, the U.S. Securities and Exchange Commission alleges Gilbertson concealed his control of Dakota Plains and manipulated the company's stock when it went public, making "millions in profits."

Also on Monday, the SEC announced that Reger agreed to settle separate allegations against him that included receiving illicit payments. In August, Reger was fired from his job as CEO of Wayzata-based Northern Oil and Gas after he told the company that federal securities regulators were seeking an enforcement action against him.

Gilbertson, a former president of the publicly traded Northern Oil, and Reger in 2008 co-founded Dakota Plains, which is involved in transporting oil and frac sand for North Dakota's petroleum industry.

Gilbertson and Reger, both 40, installed their fathers as "figurehead executives" to run Dakota Plains, "so they could secretly wield control of the company and issue millions of shares of stock to themselves, family and friends," according to the SEC.

The two men caused Dakota to borrow $9 million from them on "generous terms," which included extra bonus payments to Gilbertson, Reger and others based on the price of Dakota Plains stock during its first 20 days of trading. Dakota's stock popped up to $12 in the first few weeks of trading, but then faded. Shares are worth about a penny today.

Gilbertson, a resident of Delano, Minn., and Sarasota, Fla., enriched himself by more than $16 million through his control of Dakota Plains, the SEC alleges.

In a statement, Gilbertson's attorney said the idea that Gilbertson made money from stock manipulation is "completely repudiated by the fact that he received stock in Dakota Plains, not cash, for his efforts." Gilbertson claims the value of his shares — as a result of loans made to the company — is less than $50,000 today.

"I absolutely deny any impropriety regarding my actions involving Dakota Plains and will defend my and my family's reputation," Gilbertson said in a statement. "The facts presented in the SEC lawsuit are without context, and I can't find a way to connect the numbers with reality."

Reger consented to an SEC order finding that he received illicit payments and skirted public disclosure requirements. The SEC said he spread his Dakota Plains stock holdings among 10 accounts in different names to conceal that he owned more than one-fifth of the company's shares and reaped millions of dollars in bonus payments. The settlement did not include the finding of stock manipulation.

Without admitting or denying the SEC's findings, Reger agreed to pay $6.5 million in disgorgement, $669,366 in interest and a $750,000 penalty.

"This settlement allows me to continue my career in any direction as I am fully able to serve as an officer or board member of a publicly traded company," Reger said in a statement.

Reger said his SEC settlement shows that Northern Oil "was wrong to characterize my termination as being with cause." Reger has sued Northern for wrongful termination after the company axed him with no severance package.

The investigation into Gilbertson, Reger and Dakota Plains began in October 2014 and was first reported by the Star Tribune last December. Gilbertson, currently CEO of a Wayzata private equity firm, controlled 11 percent of Dakota Plains stock and 38.9 percent of its promissory notes when it went public, according to the SEC. Reger controlled 21.4 percent of the company's stock and 33.3 percent of its promissory notes.

The notes saddled the company with a big debt, but the company didn't identify either as noteholders in a private placement offering.

Also named by the SEC in Monday's enforcement action were Douglas Hoskins and Thomas Howells, both of whom allegedly helped manipulate Dakota Plains' stock price immediately after its IPO. Hoskins, a resident of Minnesota and Kentucky, is a friend of Gilbertson's, the complaint stated. Hoskins declined to comment.

Howells, of Utah, is a consultant instrumental in arranging a merger between Dakota Plains and MCT, a shell company. Dakota Plains went public through a reverse merger with MCT, a method of issuing shares that is quicker and involves less regulatory review than a traditional IPO. Howells could not be reached for comment.

The SEC is seeking monetary penalties and injunctions against Gilbertson, Hoskins and Howells, as well as ban on Gilbertson from being a corporate officer or director.

Also on Monday, Minnesota stockbroker Nicholas Shermeta consented to an SEC order finding that he solicited investors for Dakota Plains, but improperly brokered the sales through an unregistered securities firm instead of his employer. Without admitting or denying the SEC's findings, he agreed to pay back $86,000 including interest, plus a $50,000 penalty. Shermeta couldn't be reached for comment.