On November 29, 2012, the SEC filed a complaint against the company. The SEC alleged that China North East Petroleum Holdings Limited in two public offerings stated to investors that offering proceeds would be used "to fund future business expansion and for general working capital purposes." Instead, the SEC alleged that that the proceeds were diverted "to corporate insiders and their family members in a manner that was neither disclosed to investors nor consistent with [China North's] representations to investors concerning the intended and permissible uses of the offering proceeds." The SEC also alleged that defendants engaged in fraudulent conduct in connection with "at least 176 undisclosed, related party transactions."

On November 30, 2012, the SEC issued a litigation release, announcing that it filed a complaint against the company. The SEC alleged that China North East Petroleum Holdings Limited in two public offerings stated to investors that offering proceeds would be used "to fund future business expansion and for general working capital purposes." Instead, the SEC alleged, the proceeds were diverted "to corporate insiders and their family members in a manner that was neither disclosed to investors nor consistent with [China North's] representations to investors concerning the intended and permissible uses of the offering proceeds." The SEC also alleged that defendants engaged in fraudulent conduct in connection with "at least 176 undisclosed, related party transactions."

By Order dated November 20, 2014, the Court permitted China North East Petroleum (CNEP)'s counsel to withdraw and ordered CNEP to retain new counsel or face the entry of a default judgment. On July 13, 2015, the Clerk of Court noted that more than thirty days have elapsed since the Order and noted the entry of default judgment against CNEP and Wang Hongjun.