SEC Shuts Down $85 Million Ponzi Scheme and Obtains Asset Freeze
Litigation Release No. 24129 / May 2, 2018
Securities and Exchange Commission v. Arthur Lamar Adams and Madison Timber Properties, LLC, Case No. 3:18-cv-252-DPJ-FKB (S.D. Miss.)
On May 1, 2018 a federal court in Jackson, Mississippi unsealed the Commission's previously filed fraud charges against a Mississippi company and its principal who allegedly bilked at least 150 investors in an $85 million Ponzi scheme. The defendants agreed to permanent injunctions, an asset freeze, and expedited discovery.
The SEC's complaint alleges that Arthur Lamar Adams lied to investors by telling them that their money would be used by his company, Madison Timber Properties, LLC, to secure harvest timber rights from various land owners located in Alabama, Florida, and Mississippi, and promised annual returns of 12-15%. But Madison Timber never obtained any harvesting rights. Instead, Adams allegedly forged deeds and cutting agreements as well as documents purportedly reflecting the value of the timber on the land. Adams also allegedly paid early investors with later investors' funds and convinced investors to roll over their investments. According to the complaint, Adams used investors' money for personal expenses and to develop an unrelated real estate project.
In a parallel action, the U.S. Attorney's Office for the Southern District of Mississippi yesterday also announced criminal charges against Adams.
The SEC's complaint, filed under seal in federal court in Jackson, Mississippi on April 20, 2018 and unsealed yesterday, charges Adams and Madison Timber Properties with violating the antifraud provisions of the federal securities laws, i.e. Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court granted the SEC's request for an asset freeze and permanently enjoined Madison Timber and Adams from violating the antifraud provisions of the federal securities laws and ordered Adams to surrender his passport. Adams and Madison Timber consented to the entry of the court order.
The SEC's continuing investigation is being conducted by Krysta Cannon and Justin Delfino in the agency's Atlanta office and is being supervised by Peter Diskin. The SEC's litigation will be led by Shawn Murnahan and supervised by Graham Loomis, with assistance from Kristi H. Johnson, an Assistant United States Attorney in the civil division of the United States Attorney's Office from the Southern District of Mississippi. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of Mississippi and the Federal Bureau of Investigation.