The Frankowski Firm

JOHN WOODS ALLEGEDLY STEALS $110 MILLION FROM ELDERLY INVESTORS

Ponzi Scheme

Ponzi Scheme

The SEC has filed an emergency action to stop an alleged decade-long Ponzi scheme perpetrated by John Woods. The report claims that Woods raised more than $110 million from over 400 investors. The investors bought membership units in Horizon, an entity controlled by Woods. According to the report, the investors consisted of many elderly retirees who were misled to believe the Horizon investment would pay a fixed rate of return and offer a penalty-free principal return.

Woods has been the majority owner and in control of Southport Capital (“Southport”) since 2008. Woods’ ownership of Southport was not disclosed to the broker-dealer and investment adviser firm, of which he was a registered representative. In 2016, the firm asked Woods to resign after becoming concerned that Woods was involved in undisclosed outside business activity.

Additionally, Woods has been the registered agent of Horizon Private Equity, III, LLC (“Horizon”) since it was formed in 2007. Horizon is not registered with the SEC, and according to the SEC, Horizon was the primary vehicle through which Wood’s alleged Ponzi scheme raised more than $100 million from investors.

Woods allegedly promised Horizon investors that the investments were very safe, would pay a fixed rate of return, and that investors could get their principal back without penalty subject to a waiting period. The SEC reports that most of the Horizon investors did not receive written materials regarding the terms of their investment. Instead, the investors trusted the verbal description of the investment provided by Woods and other involved parties.

Woods’ Ponzi scheme is “massive and ongoing,” according to the SEC. Horizon was reportedly only able to make $21 million in interest payments and returns of investor capital from 2019-2021 by pulling from new investor money totaling $40 million. The SEC claims the full scope of Woods’ fraud has not been determined yet. As of July 2021, the SEC estimates 400 Ponzi scheme investors are owed at least $110 million in principal.

The SEC reports that Woods attempted to minimize his involvement with Horizon despite owning the company. Woods allegedly claimed he never controlled the Horizon operations and was merely an investor. In response to the reported Ponzi scheme, the SEC requests a trial by jury and lists six counts of fraud and two counts of aiding and abetting.

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