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.