The US Securities and Exchange Commission (SEC) has filed an emergency action to stop a Ponzi scheme.
The regulator said that it was granted a temporary restraining order and asset freeze against John Woods from Marietta, Georgia and two entities he controls: investment advisory firm Livingston Group Asset Management (trading as Southport Capital) and investment fund Horizon Private Equity.
According to the complaint, Woods and the two companies raised $110m (£81m, €94m) from more than 400 investors across 20 states by offering and selling membership units in Horizon.
Investors, some of whom were elderly retirees, were told that the Horizon investments were safe, that they would pay a fixed rate of return, and that they could get their principal back without penalty after a short period.
But the SEC alleges that the statements were “false and misleading” because Horizon did not earn any “significant profits from legitimate investments”, and returns to earlier investors were just taken from newer investor money.
Additionally, the regulator said that Woods “repeatedly lied to the SEC during regulatory examinations of Southport”.
Preying on ‘clients’ fears’
“Investors felt comfortable investing in Horizon in large part because of their relationships with advisers at Southport,” said Nekia Hackworth Jones, director of the SEC’s Atlanta regional office.
“As alleged in the complaint, Woods and Southport preyed upon their clients’ fears of losing their hard-earned savings and convinced them to place millions of dollars into a Ponzi scheme by falsely promising them a safe investment with steady returns.”
As a result, the SEC has charged Woods, Southport and Horizon with violating the antifraud provisions of the federal securities laws.
Now the watchdog is seeking preliminary and permanent injunctions, disgorgement, prejudgement interest, civil penalties, an asset freeze, and the appointment of a receiver.