SEC Obtains Emergency Relief, Charges Investment Adviser and Its Principal with Operating $110 Million Ponzi Scheme
Litigation Release No. 25181 / August 25, 2021
Securities and Exchange Commission v. John J. Woods, Livingston Group Asset Management Company d/b/a Southport Capital, and Horizon Private Equity, III, LLC, No. 1:21-cv-03413-SDG (N.D. Ga. filed August 20, 2021)
On August 20, 2021, the Securities and Exchange Commission filed an emergency action to stop a fraudulent Ponzi scheme allegedly perpetrated by Marietta, 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, 2021, 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.
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. 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 complaint charges Woods, Southport, and Horizon with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. Additionally, the complaint charges Woods and Southport with violating the antifraud provisions of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, and each of the defendants with aiding and abetting the violations of the other defendants. The complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, civil penalties, an asset freeze, and the appointment of a receiver.
The SEC's ongoing investigation is being conducted by enforcement staff in the Atlanta Regional Office, with assistance from the Division of Examinations. The investigative team includes Melissa Mitchell, Erin East, and Tiffany Kunkle and is supervised by Matthew McNamara and Justin Jeffries. The SEC's litigation will be led by Joshua Mayes and H.B. Roback.