As suspect energy investments go, Mr. Milby’s offerings are pretty standard. Through private placement offerings, he sold units in limited liability partnerships managed by two companies he owned, Mid-America Energy and Mid-America Oil and Gas, that would use the money for shallow drilling mostly in Kentucky. Investors were told that they would receive monthly checks for as much as $4,800 for 30 to 50 years, according to the S.E.C., which said Mr. Milby bragged to some investors that “no one who has invested with me has ever lost money.”

What Mr. Milby didn’t tell investors also spoke volumes. He had filed for bankruptcy in 2003, and in 2005 and 2006 several states had banned him from selling securities, the S.E.C. said. The agency also said that Mr. Milby was barred from drilling in Texas and that the Kentucky counties where he was drilling had never produced enough oil to support his lofty claims. And, while some individuals received modest dividends from partnerships managed by Mr. Milby and the Mid-America companies, no investors ever recouped their entire investments, the S.E.C. said.

Mr. Milby’s story illustrates the limits of state securities regulators, who cannot keep a suspect operation from seeking investors in other states  and struggle to enforce bans even in their own states. For months, Mr. Milby continued to seek out investors across the country, even though several states had filed cease-and-desist orders against him.

Regulators in Tennessee, where Mid-America Energy was registered, did not issue any public warnings against the company despite numerous complaints from investors. Leslie A. Newman, the state’s commissioner of commerce and insurance, said that issuing a cease-and-desist order would have prevented the state from aiding in other investigations, such as the S.E.C.’s.

“There is still federal activity ongoing in this case,” Ms. Newman said. “Other agencies with criminal authority are still actively pursuing this case.” She declined to say which agencies were involved.

To date, Mr. Milby faces just one criminal charge, a count of felony fraud in a Louisiana parish.

Some federal prosecutors say they lack the resources to chase after every allegation of an oil and gas scheme.

Image In a letter to prospective investors, Gary Milby sought to sell stakes in an oil venture in Kentucky.

“These are complex cases that take a lot of investigative time, and there’s just not a lot of investigative resources in this area right now,” said David L. Huber, the United States attorney for the Western District of Kentucky.