A Georgia investment advisor has been charged by the Securities and Exchange Commission for allegedly running a decades-long Ponzi scheme that has defrauded investors of more than $110 million.
A federal judge issued a temporary restraining order and froze the assets of John Woods of Marietta, Ga., yesterday after the SEC filed an emergency action on Friday in the U.S. District Court for the Northern District of Georgia. The SEC is pursuing civil fraud charges against Woods and his two entities: registered investment advisor Livingston Group Asset Management Company, which does business as Southport Capital, and investment fund Horizon Private Equity III LLC.
Judge Steven Grimburg granted the SEC's request for Woods and Horizon and ordered expedited discovery with respect to Southport, among other relief, according to a news release from the SEC. He also granted the request for a receivership to be appointed to gather, preserve and protect any existing assets.
According to the SEC complaint, Woods, 56, has been running a massive Ponzi scheme that includes more than 400 investors in at least 20 states. The SEC said that as of the end of July, investors in the Ponzi scheme were owed more than $110 million in principle.
The SEC said the Ponzi scheme is ongoing and continues to raise money from new investors each month. It also noted that many of the investors are retirees who were preyed upon by advisors at Southport, which was owned and controlled by Woods.
Investors, the SEC said, were promised returns of 6% to 7% interest, guaranteed for two to three years, for non-specific investments in a fund called “Horizon Private Equity.” The complaint said Woods and his Southport cohorts, which included a brother and a cousin, told investors that Horizon would earn a return by investing their money in vehicles such as government bonds, stocks, or small real estate projects, that they would pay a fixed rate of return, and that investors could get their principal back without penalty after a short waiting period.
None of that was true, the complaint said, noting that Woods and Southport were only able to pay the guaranteed returns to existing investors by raising and using new investor money. “Horizon has not earned any significant profits from legitimate investments; instead, a very large percentage of purported ‘returns’ to earlier investors were simply paid out of new investor money,” the complaint said.
The SEC argued that the Ponzi scheme is unlikely to pay back existing investors their principle, let alone the promised returns, because the worth of Woods and his entities is not realistic. It warned that investors stand to lose significant portions of their retirement savings when the scheme inevitably collapses. “The longer the scheme continues, the larger the losses will be for those left holding the bag,” the SEC said.
The SEC said Southport has more than $824 million in client assets under management, and “given his fraudulent conduct, and Southport’s role in the fraud, Woods cannot be allowed to remain in charge of a firm with such a significant sum of client assets under management,” the SEC said.
Wood, the SEC noted, has been in the securities industry since at least 1989 and has been the majority owner and in control of the operations of Southport since about 2008. The firm’s place of business is in Chattanooga, Tenn. But from 2008 to 2018, he concealed his ownership of and control over Southport because, during that time, he was a registered representative at an institutional, dually registered broker-dealer and investment advisor firm, the SEC said. According to his BrokerCheck profile, he had been with Oppenheimer & Co. Inc. from 2003 to 2016.