The US Securities and Exchange Commission has moved to obtain temporary restraining order and asset freeze on an investment adviser and his associates from operating a $100m Ponzi scheme.
The SEC said in a statement that it has filed an emergency action to stop a fraudulent Ponzi scheme allegedly perpetrated by Georgia resident John Woods and two entities he controls: registered investment adviser Livingston Group Asset Management Company, d/b/a Southport Capital (Southport), and investment fund Horizon Private Equity, III LLC (Horizon).
On August 24, the United States District Court for the Northern District of Georgia granted a temporary restraining order and asset freeze with respect to defendants Woods and Horizon and ordered expedited discovery with respect to Southport, among other relief.
400 investors
According to the SEC's complaint, filed in the United States District Court for the Northern District of Georgia, the defendants have raised more than $110 million from over 400 investors in 20 states by offering and selling membership units in Horizon.
Woods, Southport, and other Southport investment adviser representatives allegedly told investors - including many elderly retirees - that their Horizon investments were safe, would be used for different investment activities, would pay a fixed rate of return, and that investors could get their principal back without penalty after a short waiting period.
'Misleading'
According to the complaint, however, these statements were false and misleading: Horizon did not earn any significant profits from legitimate investments, and a very large percentage of purported "returns" to earlier investors were simply paid out of new investor money, the SEC statement said. The complaint also alleges that Woods repeatedly lied to the SEC during regulatory examinations of Southport.
"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."
The SEC's complaint charges the defendants with violating the antifraud provisions of the federal securities laws. The complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, civil penalties, an asset freeze, and the appointment of a receiver.
