Articles Posted in Ponzi Scheme

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from getting fleeced in Ponzi schemes. All too often, financial advisors assign fancy names to “investments” that turn out to be swindles. The Securities and Exchange Commission (SEC) filed suit against Michael Mooney, Britt Wright, and Penny Flippen in connection with their participation in a Ponzi scheme that raised more than $110 million from approximately 400 investors.

The former representatives of Livingston Group Asset Management Company (doing business as Southport Capital), “recommended clients invest at least $62 million in `Horizon Private Equity III.’ Horizon was billed as a private fund controlled by John Woods, Southport’s former owner and manager.” In August 2021, the SEC charged Woods and Southport with multiple counts of securities fraud for operating Horizon as a Ponzi scheme, according to thediwire.com.

As with many, if not most, Ponzi schemes, the fake investments were marketed heavily to older clients, who thought they were legitimate. According to the SEC, “many of the defendants’ clients were elderly and inexperienced investors who communicated that they wanted safe investment opportunities for their assets, a large percentage of which were earmarked for retirement.”

Chicago-based Stoltmann Law Offices is investigating allegations made by the United States Securities and Exchange Commission (SEC) regarding former LPL Financial Advisor Eric Hollifield and stealing over $1 million from a client.  This is not the first time an LPL financial advisor has been caught red-handed stealing from LPL firm clients. Given the independent contractor model employed by LPL Financial over its financial advisors, these sorts of scams are all too easy to pull off and continue to happen.

According to the SEC’s complaint, Hollifield, who worked out of Dacula, Georgia, executed several fraudulent ruses designed to hide his true intent. First, he solicited investors to put money into a company called Century Warehouse, Inc., which was allegedly involved in the warehousing and shipping industry. From October 2019 through October 2020, Hollifield is alleged to have raised $5.35 million from advisory clients for Century Warehouse. Hollifield’s alleged fraud were his representations to investors that Century intended to use investors funds to buy PPE and other COVID-related supplies for the benefit of veterans.  According to the SEC, at least $1 million of the money raised from investors went back to Hollifield’s bank account where he spent the money on personal expenses.  The SEC also alleges that Hollifield used $1.7 million in misappropriated investor money to purchase a home sitting on 37 acres in Winder, Georgia.  The SEC alleges further that Hollifield lied to a client about setting up a “high yield” account at Goldman Sachs and instead stole the money.

There are two primary compliance and supervisory models that have existed in the brokerage industry for decades.  The first is the one most people think of when they hear the term “brokerage firm”.  They envision a huge office with fifty cubicles and telephones ringing. This office model is still common in the large “wire house” brokerages like Merrill Lynch and Morgan Stanley. In that structure, a branch manager is stationed at his post on-sight, reviews all incoming and outgoing correspondence, reviews a daily trade blotter, and reviews a daily transaction ledger that shows all checks sent and received for accounts in his branch. This branch manager wanders the office, peaks over shoulders, and should ensure his brokers are living up to the standards of a licensed securities broker.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with financial advisors who fleece older clients. In our practice, we’ve seen countless scams where older investors are lured into fraudulent investments. Unfortunately, investment and financial advisors frequently exploit and rip off elderly clients, who are often trusting yet vulnerable.

Common ruses involve “estate planning” seminars that come with a “free” lunch or dinner. Afterwards, brokers are known to peddle scam investments to those who show up. Lately though, investors are aggressively pitched through emails, texts and phone calls. These swindles mushroomed during the pandemic. According to the FBI, the number of scams targeting Americans over the age of 60 exploded during the pandemic, with upwards of 92,000 victims in 2021 alone involving estimated losses of nearly $2 billion, a 74% increase from 2020.

In the typical phone scam, fraudsters call older Americans, who are most likely to pick up the phone and listen to a pitch – and send money. Even former FBI and CIA director William Webster was targeted in a Jamaican lottery scam in 2014 when a caller claimed he won a sweepstakes, reports CBS News. The unsolicited caller became threatening when Webster declined to pay $50,000 to collect the winnings.  “If it can happen to me, it can happen to you,” Webster warned in a public service announcement.

Chicago-based Stoltmann Law Offices is representing clients who’ve suffered investment losses from advisors who sold fraudulent investments products and offerings. Firms like UBS argue these are frequently, “selling away” claims, suggesting they have no liability for the wrongs of their brokers who go far afield to rip off their clients. The big banks are wrong.

UBS Financial Services is suing Robert Turner, of McGregor, Texas, on fraud allegations and is asking a judge to seize Turner’s assets to help UBS offset the cost of repaying its customers for some $17 million in losses. Turner is a former broker with UBS.

The lawsuit alleges Turner solicited at least 23 UBS customers to buy “purported investments” issued by Fairfax Financial Corporation. UBS claims the products were not authorized by the broker and didn’t know Turner was selling them. Turner, 67, worked at UBS for 25 years before going to work for Stifel, Nicolaus & Co. in October 2021. He has since resigned from Stifel and has lost his license as a financial adviser.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses from dealing with broker-advisors who have run Ponzi schemes right under their big-bank firm’s nose. Unscrupulous financial advisors have been known to steal clients’ money to pay for their lifestyle. As they are pocketing investors’ funds, they are often pitching  investments like Ponzi schemes, which are fake and fraudulent investment schemes fueled by money flowing in from new investors.

Shawn E. Good, 55, from Wilmington, North Carolina, a former Morgan Stanley advisor, had “clients send funds to his personal bank account to supposedly make low-risk investments in real-estate development projects,” according to a U.S. Securities and Exchange Commission (SEC) complaint filed in federal court. “Good defrauded investors — including retirees — out of at least $4.8 million, resulting in more than $2 million of losses,”  the SEC said.

A spokesperson for Morgan Stanley told Advisorhub.com the bank “is reviewing the matter and that the alleged conduct is plainly unacceptable. Good is no longer employed by the bank.” The Morgan spokesman added “We are currently reviewing the matter, which affects a small number of clients, and are cooperating with the SEC and other government authorities.”

Stoltmann Law Offices, P.C. is a Chicago-based investor-rights and consumer protection law firm offering representation nationwide on a contingency fee basis to defrauded investors and consumers alike. If you are a victim of the alleged Ponzi scheme perpetrated by former Morgan Stanley financial advisor Shawn Good, you likely have sustainable legal claims against Morgan Stanley.  It is critical to your chances to recover what was taken from you to consider all legal options and to not depend on the Securities and Exchange Commission or criminal prosecutors to make you whole.

The attorneys at Stoltmann Law Offices have over fifty years of combined experience representing victims of Ponzi schemes. According to published reports, Shawn Good is alleged to have stolen millions of dollars from victims of a scam he ran while he was a financial advisor at Morgan Stanley.  The SEC has filed a civil complaint against Good, and Morgan Stanely fired him in February for failing to cooperate with an internal investigation in connection with his scheme.

Morgan Stanley can be held liable for Shawn Good’s scheme for two primary reasons.  First, as an agent of Morgan Stanley, the company is responsible for Good’s conduct in the course and scope of that employment. Sure, running a criminal scheme is not necessarily what his employment with Morgan Stanley was about, but offering investment advice and financial services was.  You are not seeking to hold Morgan Stanley liable because Good broke into a jewelry store, the agency liability stems from Good’s solicitation to invest in securities and products in furtherance of providing investment advice. That falls squarely inside the agency relationship with Morgan Stanley.

Chicago-based Stoltmann Law Offices represents investors nationwide on a contingency fee basis who’ve been victimized by Ponzi schemes. One of the most notorious Ponzi schemes in recent years involved Horizon Private Equity, which bilked some $110 million from 400 investors. The operators of the scheme have been sued by investors in a class action lawsuit, but some investors have viable individual claims to pursue against Oppenheimer through FINRA Arbitration. The fund was sold by brokers at Oppenheimer.

An investor class-action suit claims “Oppenheimer management, from 2008 through December 31, 2016, actively aided” John J. Woods (the lead seller for Horizon); his brother, defendant James Wallace Woods; and their cousin, defendant Michael J. Mooney, each a financial adviser at the firm, with funneling investor money into Horizon.” The Horizon scheme “continued to raise money from unsuspecting investors through Southport Capital, a registered investment advisory firm, for nearly five more years,” the suit alleges. The alleged Ponzi scheme, according to the suit, “made no significant profits from legitimate investments, and `returns’ to investors came instead from new investor money.”

On August 20 2021, the U.S. Securities and Exchange Commission (SEC) filed an emergency action against Woods, Southport Capital and Horizon Private Equity, III, LLC for “alleged violations of federal securities fraud, with the intent of freezing the parties’ assets, appointing a receiver and gaining a full accounting of the finances involved.”

Stoltmann Law Offices, P.C., a Chicago-based securities and investment fraud law firm with offices throughout the Chicago-land area, is investigating claims made by the United States against Ronald T. Molo.  It is important to realize the allegations made by the US Attorney are unproven and Mr. Molo is entitled to a presumption of innocence until provide guilty.  Molo has been indicted on six counts of wire fraud, which means money was transmitted electronically for fraudulent purposes, simply put.  According to the indictment, Mr. Molo was a Financial Advisor for a “national financial services firm,” working from an office in Joliet.

According to his FINRA BrokerCheck Report, Mr. Molo was a licensed financial advisor with Edward Jones & Company from May 2001 to June 2021 when he was terminated for cause. According to Edward Jones, Mr. Molo was terminated because customer funds were transferred to outside accounts in his control after soliciting some purported investment opportunity.  The BrokeCheck Report also shows that Edward Jones has already paid out $875,000 to victims of this alleged fraud to settle claims.  The allegations in the indictment support the contentions made by Edward Jones when it terminated Mr. Molo.  According to the Indictment, Molo, who the grand jury found had fiduciary duties to his clients, falsely advised multiple clients that he had a good investment opportunity for them. The investment allegedly was some sort of tax-exempt, interest-bearing bonds.  He advised these clients that the investment opportunity would pay regular, periodic interest at 5%, that the interest would be tax-exempt, like a municipal bond, and was being offered through reputably investment houses like Lord Abbett, Spire Investment Partners, and Ivory Stone Investment Partners.  None of this was true, alleges the Indictment, and Molo knew his representations were untrue and made with intent to defraud. Molo had his clients, it has been alleged, execute authorizations to transfer funds from their Edward Jones accounts to an outside account, which unbeknownst to the victims, was an account Molo controlled personally.

This case is another example of a Ponzi scheme that lacks one of the most well-known hallmarks of one – the “it sounds too good to be true” concept.  Molo’s alleged scam offered 5% interest per year, not 50% or some other unrealistic on  its face return.  Many Ponzi schemes involve alleged investments that offer outlandish or unrealistic returns.  Bernie Madoff changed this perception and is one of the many reasons why his scheme lasted so long and did so much damage.  Bernie Madoff never provided outlandish returns to his clients, only stable, consistent returns for years.  Brokerage firms like Edward Jones have legal duties and responsibilities to supervise the conduct of their licensed representatives. The securities industry is heavily regulated at both the state and federal level, and many of these regulations have to do with supervision and compliance. Money being sent out of a client account to an unaffiliated 3rd party account is a huge red flag and implicates anti-money laundering rules and regulations, which are very serious issues for brokerage firms like Edward Jones.

Stoltmann Law Offices, a Chicago-based securities, investor, and consumer rights law firm has spoken to victims of the DeepRoot Funds scam and continues to investigate claims against third parties to recover these losses. On August 20, 2021, the Securities and Exchange Commission filed a complaint against Robert J. Mueller, DeepRoot Funds, LLC, Policy Services, Inc., and several other “relief defendants” alleging that Mueller and DeepRoot abused their roles as investments advisors to the two primary DeepRoot funds; the 575 Fund, LLC and the Growth Runs Deep Fund, LLC. The SEC flat-out alleges that Mueller used these funds as his personal piggy bank, including paying for weddings to wives number 2 and 3, and paying for the divorce from wife number 2.  Investors are likely looking at a total loss of funds invested amounting to nearly $58 million. Because the SEC has already gone after Mueller and the Funds, investors need to look for viable third parties that could have liability for investor losses.

The first and most obvious target for investors here would be the financial or investment advisor that solicited the transactions in the first place.  If your RIA or broker solicited you to invest in DeepRoot, it is almost certain this solicitation constituted a breach of fiduciary duty. RIAs will, with a straight face, ask clients in these situations rhetorically “how were we supposed to know?” Well, the investment advisor with the licenses, training, education, and statutory fiduciary duties to their clients are paid to know.  Whether your advisor is a FINRA registered broker or a Registered Investment Advisor (RIA), they have obligations to understand and know the products they sell to their clients.  On their faces, these DeepRoot Funds were unregistered, private, unproven, and speculative private-investment plays. Right there is enough information to disqualify these funds for investment by almost every retail investor in America.

To put it bluntly, the law obligates fiduciary investment advisors to understand the risks and characteristics of the investments they offer to their clients. Failing to do so constitutes a breach of a fundamental and basic duty. Investment advisors can be liable to their clients for this fundamental breach of duty. How are they supposed to know? They are paid to know and they are licensed professionals who are obligated to know whether the fund that are recommending uses investor funds to legitimately invest, or, as with DeepRoot, used investor funds to pay for divorces, a wedding, amongst other abuses.

Stoltmann Law Offices, P.C. is a Chicago-based securities and investor rights law firm that offers representation on a contingency fee basis to victims of investment fraud nationwide. On August 20, 2021, the Securities and Exchange Commission (SEC) filed a complaint in United States District Court for the Northern District of Georgia (Atlanta) alleging that John Woods “has been running a massive Ponzi scheme for over a decade.” That is the first line of the complaint, which goes on to allege that more than 400 investors are owed over $110,000,000 on alleged investments in Horizon Private Equity Group, III, LLC.  The complaint also names Livingston Group Asset Management Company, d/b/a Southport Capital, which is a registered investment adviser firm owned and controlled by John Woods.

The sales pitch for these investments in Horizon promised returns of 6-7% interest guaranteed for 2 or 3 years.  These are not the sort of huge returns typically promised in a Ponzi scheme. In fact, these are pretty low returns when compared to the rate of return on the S&P 500 or even alternative investments like non-Traded REITs.  Ironically, now disgraced GPB Capital – which is also alleged by the SEC to be a massive Ponzi scheme, promised returns of 8%.  This sort of Ponzi scheme is more incendiary and falls into the Bernie Madoff category of promising lower, but consistent, rates of return. Investors who are victims of a Ponzi scheme promising 6-7% returns cannot say they should have known better because it was too good to be true.  Woods and his RIA represented that they would take investor funds and invest them in government bonds, stocks, and real estate projects. Investors were never told their money would be used to pay interest to earlier investors, which is what the SEC alleged they did on a massive scale. Horizon did not earn nearly enough returns through legitimate investments to pay investor interest payments and as such had to rely on new investor money to maintain those interest payments – a hallmark of a Ponzi scheme.

Victims need to look to potentially liable third parties for recovery while the SEC freezes Woods’ and Horizon’s assets and begins an accounting process that will likely take years.  The first target could be Oppenheimer.  According to the SEC complaint and FINRA, Woods was a registered representative for Oppenheimer until he was “asked to resign” in 2016 for failing to accurately disclose his involvement with Southport and Horizon. Many of his Oppenheimer clients invested in Southport and Horizon and unless Oppenheimer reached out to each of those clients and warned them that what Woods was doing was, at a minimum, not fully disclosed to Oppenheimer in violation of FINRA rules, then Oppenheimer could have liability to victims here.  Further, the SEC complaint states that Horizon primarily used two banks to move money, Bank of America and Iberiabank. They also used a custodial trust company.  These entities, depending on the details of their involvement, could also have liability to victims of this scam.

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