Compliance Corner: SEC

Editorial Staff August 27, 2021


The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

Securities and Exchange Commission
The Securities and Exchange Commission filed an emergency action to stop a fraudulent $110 million Ponzi scheme allegedly perpetrated by Marietta, Georgia resident John Woods and two entities he controls. 

The entities are registered investment advisor Livingston Group Asset Management Company, d/b/a Southport Capital, and investment fund Horizon Private Equity, III LLC.

On August 24, the US 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, the SEC said in a statement on August 25.

According to the SEC's complaint, the defendants have raised more than $110 million from more than 400 investors in 20 states by offering and selling membership units in Horizon. 

Woods, Southport, and other Southport investment advisor 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. 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 complaint also alleges that Woods repeatedly lied to the SEC during regulatory examinations of Southport, the SEC said.

"Investors felt comfortable investing in Horizon in large part because of their relationships with advisors at Southport," Nekia Hackworth Jones, director of the SEC's Atlanta Regional Office, said. "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.

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