A Georgia-based advisor and minority owner in a minor league baseball team pleaded guilty to defrauding at least $25 million from investors in a Ponzi scheme spanning more than a decade.
It marks the latest development in a case in which FINRA fined Oppenheimer & Co., the advisor’s former employer, $35 million.
John J. Woods, the former president of Southport Capital and the manager of Horizon Private Equity III, pleaded guilty to one count of wire fraud in Georgia federal court last week, according to the Justice Department. Keri Farley, the special agent in charge of FBI Atlanta, said the plea would provide relief to victims of Woods’ “greed-fueled conduct.”
Woods’ Ponzi scheme began in 2008 and lasted until the Securities and Exchange Commission shut it down in July 2021. Though SEC and DOJ filings don’t name Woods’ advisory firm from 2008 through 2016, he worked at Oppenheimer & Co. during that time, according to his BrokerCheck profile.
He also was a minority owner of the Chattanooga Lookouts, a Minor League Baseball Class AA affiliate of the Cincinnati Reds, though the team cut ties with Woods after the allegations came to light, according to reporting from FOX 12 Chattanooga.
Since 2006, Woods owned a fund called Horizon Private Equity, which bought Southport Capital, an SEC-registered investment advisor, in 2008. He placed a family member as the firm’s nominal manager before taking over full control in 2017, according to the DOJ.
Woods, as well as other Southport IARs, told Horizon investors they’d get 6% to 7% interest on their investments in monthly installments, with low-risk investments in government bonds, stocks and real estate.
But as Woods knew, investors’ returns were largely being paid from money of new and existing investors, with the fund’s ability to pay the interest relying on liquidating existing investments or using new clients’ money. Woods didn’t relay any of this to his clients, many of whom were retirees.
“Horizon did not earn any significant profits from legitimate investments; instead a very large percentage of purported ‘returns’ to earlier investors were simply paid out of new investor money,” a DOJ document detailing the allegations read.
By the time the SEC shut the scheme down in July 2021, Horizon investors were owed more than $110 million in principal, having already lost more than $25 million. In total, Horizon had more than 400 investors in 20 states, according to the DOJ. Because there was little proper documentation, millions in harmed investors’ funds weren’t accounted for, and even up to the SEC’s 2021 action, the fund continued to draw in about $600,000 per month from new investors.
Sentencing for Woods has not yet been scheduled. Representatives from Oppenheimer & Co. declined to comment.