By Ann C. Logue
Ponzi schemes are too common in the investment world, and this week the SEC announced allegations of another one. Georgia resident John Woods was charged with using an investment advisory firm that he controls, doing business as Southport Capital headquartered in Chattanooga, TN, to funnel investors into a private equity fund that he also controls, Horizon Private Equity III LLC. Horizon Private Equity has no address and no employees. The Feds allege that Horizon was a Ponzi scheme rather than an operating private equity fund.
Southport is positioned as an investment advisor that specializes in retirement planning, including for corporate 401(k) plans, with a firm emphasis on risk management. John Woods has been scrubbed from the firm’s web site, but the Internet is forever. A trip to the Wayback Machine on web.archives.org includes a letter from John Woods saying, “As a registered investment advisor, Southport Capital is required by the Securities and Exchange Commission to adopt and enforce a code of ethics and compliance that establishes the standards of conduct and culture that make our fiduciary responsibility to our clients come first. As CEO and President of Southport Capital, I assure you that our team focuses on individual attention to our clients by creating and developing customized plans for your objectives.”
Well, then. The SEC says that Woods and Company apparently marketed Horizon as a membership program to about 400 clients in 20 states, many of whom were elderly and retired. They were told that the money would be invested to earn a fixed rate of return, and that they could receive their principal back after a waiting period. The fund collected $110 million from clients but apparently has just $16 million in assets right now.
Where did the money go? Among other things, Woods is a part-owner of the Chattanooga Lookouts minor league baseball team. Also, Horizon paid large amounts of money to Woods, his brother, and his cousin as commissions.
FINRA Broker Check says that John Woods worked at Oppenheimer & Co. until 2016, despite establishing an investment firm, Horizon, in 2006 and purchasing a competing wealth management firm, Southport, in 2008. That type of arrangement is normally not allowed, and it would seem that Oppenheimer’s management didn’t know. Southport did not include Woods name on its SEC filings until 2018. Woods’s FINRA record is mostly clean except for a dispute over unauthorized trades in a client account in 2008. Maybe he was distracted by the work involved in acquiring a competitor?
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