Oppenheimer & Co., Inc. has been hit with a $36.7 million award against it, issued by a panel of arbitrators with the Financial Industry Regulatory Authority (“FINRA”). The arbitration arose from customer complaints that Oppenheimer’s broker John Woods sold them an alleged private equity fund investment which turned out to be a massive Ponzi scheme.

The investors alleged violations of FINRA rules, breach of fiduciary duty, negligence, violation of Georgia’s RICO statute, and breach of contract. The investors claimed $6 million in lost investment principal, while also demanding treble damages under the RICO statute, punitive damages, attorneys fees and case expenses, and interest.

SEC Action Against Oppenheimer Broker John Woods

The claims followed an SEC action against John Woods, of the Marietta, Georgia area. The SEC obtained a restraining order and freeze of assets against Woods last August, based on charges that Woods was operating a $110 million Ponzi scheme while registered as a stockbroker through Oppenheimer.

According to the SEC, Woods raised more than $110 million from over 400 investors in 20 states by offering and selling membership units in a fund called Horizon Private Equity.

The SEC alleged that Woods misled investors, many of whom were elderly retirees, into believing that their investments in the Horizon fund were safe and would be used for investment activities, with interest of 6% to 7%. Woods also allegedly assured the investors that they could get their investment back out of the fund without penalty after a short waiting period.

Instead, however, the fund failed to earn significant profit from legitimate investment activity and most of the “returns” paid to earlier investors came from new investor funds, in typical Ponzi scheme fashion. The SEC also alleged that Woods lied repeatedly to investigators during regulatory examinations of his independent investment advisory firm.

Oppenheimer History of Regulatory Actions

The case is the most recent in a series of regulatory run-ins and customer complaints against Oppenheimer. In 2014, Oppenheimer set aside over $12 million to pay fines related to SEC, FINRA and treasury department enforcement actions.

Pending Complaints Against Oppenheimer Broker

Mr. Woods’s FINRA BrokerCheck report reveals a staggering twenty-eight customer complaints pending against him, not including the SEC’s civil action against him which is also pending.