The United States Securities and Exchange Commission(“SEC”) has accused a Georgia investment adviser of operating a Ponzi scheme that the SEC alleges in its legal Complaint (accessible here SEC Complaint) filed in federal court has defrauded over 400 investors nationwide. The SEC Complaint alleges that investment advisers at a company called Livingston Group Asset Management Company, which does business as Southport Capital, persuaded investors to lend money to a company known as Horizon Private Equity, III, LLC (“Horizon PE”). The SEC alleges that investors in Horizon PE collectively are allegedly owed over $110 million in principal.
“Investors trusted Woods and the Southport investment advisers working at his direction, and they stand to lose significant portions of their retirement savings when the Ponzi scheme inevitably collapses. The longer the scheme continues, the larger the losses will be for those left holding the bag,” the SEC Complaint states.
According to the SEC Complaint, advisers soliciting investments in Horizon PE allegedly told clients that they would receive returns of 6% to 7% interest, guaranteed for two to three years, and that their money would be used for nonspecific investments such as government bonds, stocks, or small real estate projects. According to the SEC Complaint, clients were not told that their money would be used to pay returns to earlier investors. The SEC also alleges that investors were told they could receive their principal investment back without penalty subject to a 30-day or 90-day waiting period. The SEC alleges that because Horizon did not follow any traditional record-keeping practices, millions of dollars’ worth of investor funds are currently unaccounted for.
In August 2021, U.S. District Judge Steven D. Grimberg reportedly allowed the appointment of a receiver for, and order a freeze of the assets of, Horizon PE, stating: “The SEC has met its burden with respect to Horizon and [promoter John J.] Woods, that there is a reasonable likelihood those defendants have engaged or are about to engage in violations of the securities laws.”
This law firm has not independently verified any of the foregoing allegations, and is relying on the SEC’s allegations in publicly filed court documents alleging that Horizon PE operated as a Ponzi scheme. A Ponzi scheme refers to purported investments in which early investors in the scheme are paid funds from later investors, thus creating the illusion of legitimacy and solvency. Ponzi schemes have historically failed once the promoter of the scheme can no longer pay out investors through newly raised money.
Ponzi schemes get their name from Charles Ponzi, a charismatic Italian immigrant and polished salesman who duped numerous investors into parting with millions of dollars in exchange for the opportunity to supposedly purchase overseas postal reply coupons at a discount, to then be sold in the U.S. at a significant profit. Unbeknownst to investors, who were promised an enormous 50% return on their investment, Ponzi was not putting investment funds to the use he had represented, but instead was paying handsome “returns” to early investors from the proceeds of later investments.
Investors in Horizon PE who may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules). The Gray firm has substantial experience representing investors in claims arising from alleged Ponzi schemes and alleged investments frauds, including representing approximately 300 clients in litigation under the Commodity Exchange Act arising out of a Futures Commission Merchant’s aiding and abetting of convicted Ponzi schemer George Hudgins. See Carey, et al. v. Hudgins, et al., U.S. District Court for the Eastern District of Texas Docket No. 6:08-cv-344. The firm also served as court-appointed co-lead counsel in a case in which plaintiffs recovered $5,100,000 from a law firm accused of violating North Dakota securities law in connection with an unregistered securities offering that turned out to be a fraudulent scheme. See Aleem, et al., v. Pearce & Durick, No. 1:15-cv-00085 (U.S. District Court for the District of North Dakota)