SEC Accuses Atlanta Financial Advisor of Orchestrating a Decade-Long Ponzi Scheme
From the Desk of Jim Eccleston at Eccleston Law:
On August 20, 2021, the Securities and Exchange Commission (SEC) initiated a civil action (the Complaint) in Georgia federal court against an Atlanta-based financial advisor, John J. Woods (Woods, CRD No. 1949233), as well as certain related corporate entities. Specifically, the SEC has accused Mr. Woods of orchestrating a decade-long Ponzi scheme purportedly impacting more than 400 investors in at least 20 states through Woods’ SEC-registered investment adviser firm, Livingston Group Asset Management Company, Inc. d/b/a Southport Capital (Southport), in addition to Horizon Private Equity, III, LLC (Horizon).
Marietta resident Woods, 56 years, is the President and majority owner of Southport, a financial advisory firm with reported assets under management of $824 million. A seasoned financial advisor, Woods began his career in the securities industry in 1989 with now-defunct Lehman Brothers Inc. Most recently, from 2003-2016, he was affiliated with Oppenheimer & Co. Inc. as a stockbroker. As alleged in the Complaint, Woods was asked to resign in 2016 by his former employer, presumably due to his involvement in undisclosed outside business activities, as described below.
As alleged in the Complaint, Woods and certain other Southport investment adviser representatives sold investments in Horizon, in many instances to elderly investors. According to the Complaint, investors were enticed to invest in the Ponzi scheme with dubious promises of earning safe and conservative returns of approximately 6-7%, with “no possibility of losing the principal investment in Horizon.” Moreover, the SEC has alleged that certain Southport advisers—including Woods, his brother, and a cousin—touted Horizon with numerous false and misleading statements, including among other misrepresentations that:
- Horizon was as a safe type of annuity with a guaranteed rate of return of about 6-7%;
- Horizon carried little to no risk;
- that Southport employees would not receive any compensation for recommending Horizon investments; and
- that Horizon was not affiliated with Southport.
According to the Complaint, “Horizon is an entity that Woods used strictly for the purpose of raising money from investors in the Ponzi scheme” and had no offices or employees of its own. Further, Woods and other Southport investment advisers “did not tell investors in Horizon—most if not all of whom were clients to whom they owed a fiduciary duty—that investor funds would or could be used to make payments to earlier investors…” in classic Ponzi-fashion. Of particular concern, the SEC has described the Ponzi scheme as “massive and ongoing”, due to the approximate decade-long time frame in which Woods and certain Southport colleagues purportedly carried out their fraudulent scheme, as well as the amount of monies at issue.
As alleged by the SEC, from January 1, 2019 to May 28, 2021, Horizon received “approximately $49 million in deposits in the Horizon accounts” of which more than $40 million represented new investor money. During the same time period, the SEC has alleged that Horizon withdrew or transferred approximately $48 million from its accounts, and of that mount, more than $21 million was used for interest payments and return of investor capital to continue the long-running Ponzi scheme. In light of the situation, at this stage the SEC is seeking an order from the Court to freeze the assets of the Defendants, in addition to requiring the Defendants to perform an accounting of the amounts they raised and the use of the proceeds.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
Tags: eccleston law, sec, ponzi scheme
