His clients were everyday people— educators, military veterans and the elderly — who were hoping to sock away enough money to secure a comfortable retirement.
Over the span of a decade, Marietta-based investment adviser John J. Woods persuaded more than 400 investors in 20 states to trust him with their investments. He and his associates made an attractive offer: a guarantee of 6% to 7% interest for two to three years for investing in a fund called Horizon Private Equity. Investors weren’t told much about how the fund worked, only that money would be put in things like government bonds or small real estate projects.
But what “returns” some investors received were paid out of new investor money; no real earnings materialized, according to federal regulators.
Now, the Securities and Exchange Commission has accused Woods, 56, of operating a massive Ponzi scheme. By the end of July, according to the SEC, Horizon owed investors more than $110 million in principal alone but had liquid assets worth less than $16 million. And the debt continues to grow, according to a suit the SEC filed on Friday in federal court in Atlanta.
Tuesday, a federal judge froze Woods’ assets, including his minority interest in the Chattanooga Lookouts minor league baseball team.
Another layer of intrigue in the case: Some Atlanta litigators have raised concerns about a potential for other securities violations. One focus could be on Oppenheimer & Co., an institutional investment adviser they allege appeared to turn a blind eye to Woods’ “selling away scheme.”
In “selling away,” an investment adviser sells securities in private transactions while registered with another firm, a prohibited practice because it is susceptible to fraud. On the website of another company he heads, Woods says he spent the last 26 years as executive director at Oppenheimer & Co.
The SEC complaint says that Woods was working for an institutional investment adviser in 2008 when he started soliciting investments for Horizon through another investment adviser firm he secretly controlled: Southport Capital. At some point in 2015, the institutional investment adviser, which the suit doesn’t identify, became suspicious Woods was affiliated with Horizon or with Southport. But Woods denied it and continued to work for the institutional adviser.
Woods also took steps to conceal his affiliation with Horizon to the SEC, the suit alleges. As part of his employment with the institutional investment adviser, Woods was required to disclose any outside business activities in which he was engaged. But during a 2018 SEC examination, Woods failed to accurately disclose his involvement in Horizon, the suit says.
David Chaiken, who is representing Woods in the SEC complaint, said he is working with regulators on a proposed order to settle the matter.
“Going forward, we are going to let the judicial process play out and limit any further comments or information to the courtroom at this time,’' Chaiken wrote in an email to the AJC.
A spokesman for Oppenheimer said the firm “ceased doing business with Southport Capital many years ago.” Shortly after, Woods resigned.
In the SEC complaint against Woods and his affiliates, it is not yet clear whether investors will be able to recoup their money. In recent months for which SEC obtained bank records, Woods raised in excess of $600,000 per month in new investments.
However, millions of dollars worth of investor funds are currently unaccounted for, because Woods “did not use any of the typical record-keeping practices one would expect from a legitimate investment fund,” the SEC complaint states.
Among the fund’s investors is a retired Delta Airlines pilot who lives in Hall County and invested more than $1 million in Horizon, representing the majority of his retirement savings. His wife also invested the majority of her savings, more than $140,000, a court document shows.
Woods and a fellow adviser the couple trusted “indicated to us that the Horizon investment carried very little risk and that we could take our money out of Horizon at any time,” the retired pilot wrote.
Besides being a minority owner of the Chattanooga Lookouts, Woods is a well-known figure in the Atlanta area because of his involvement in youth sports. According to information on the Southport website, he has served as president of Friends of Chastain Park foundation and serves on the board of 643 Baseball Foundation, apparently the 6-4-3 Foundation Inc. Both are small nonprofits. The website also says he was chairman of Walton High School Touchdown Club.
The freeze order affects assets of Horizon and Woods, including his interest in the Chattanooga Lookouts. The judge also appointed a receiver for Woods’ assets. However, the judge did not grant the SEC’s request for a temporary restraining order against Livingston Group Asset Management Co., which does business as Southport Capital.
Georgians accused of Ponzi schemes
Federal regulators say that Ponzi schemes and other investment fraud have spiked during the pandemic, though some schemes had gone on for years. The latest case came to light this week after federal regulators accused Marietta investment adviser John Woods of a massive Ponzi scheme totaling more than $110 million. Here are other recent cases involving Georgians.
In August 2021, Christopher A. Parris of Lawrenceville pleaded guilty to mail fraud related to a Ponzi scheme. He and a partner formed a New York business and solicited investments for a business run by church swindler Ephren Taylor. When Taylor told them the investors’ money had been lost, they tried to solicit money from new investors to try to recoup the money. Parris also was charged with a coronavirus-related scheme to sell nonexistent masks and other equipment to the Department of Veterans Affairs and to states.
In May 2021, Ron Throgmartin, 57, of Buford was criminally charged along with two others with running a Ponzi scheme that raised about $650 million. He and the others marketed investments in cattle and marijuana, according to the Colorado indictment, and supplied victim-investors with promissory notes purporting to pay returns of about 10% to 20%. Throgmartin received more than $3 million over the course of the scheme, prosecutors allege.
Credit: Channel 2 Action News
Credit: Channel 2 Action News
Also in May 2021, Maurice Fayne, star of Love & Hop Hop: Atlanta, pleaded guilty to federal charges involving a federal pandemic loan program and a Ponzi scheme. Federal prosecutors said he solicited investments in his trucking business and spent the money on luxury trips, adult entertainment and shopping excursions. Sentencing is scheduled for Sept. 8.
In April 2021, a federal judge ordered Dean Alford, a former Republican lawmaker and Georgia Board of Regents member, to disgorge more than $8.8 million fraudulently obtained from investors in a Ponzi scheme and to pay another $2 million in interest and civil penalties. In May, Alford was criminally indicted related to the alleged Ponzi scheme involving a company he headed, Allied Energy Services.
In October 2020, a lawsuit was filed accusing missing financial adviser Christopher Burns of running a Ponzi scheme. Burns disappeared from his Berkeley Lake home in September 2020, a day before he was to give documents related to his business to the Securities and Exchange Commission. Burns is now on the FBI’s most wanted list.
In September 2020, former University of Georgia student Syed Arham Arbab was sentenced to five years in federal prison for running a Ponzi scheme from his fraternity house. Prosecutors say he defrauded more than 100 investors of about $1 million. He spent the money on luxury trips, adult entertainment and shopping excursions.
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Credit: Clayton County Police Department