A former investment advisor who pleaded guilty to perpetrating a 13-year Ponzi scheme will spend nearly eight years in prison, according to the Justice Department.
John J. Woods pleaded guilty to one count of wire fraud in March of last year for running the scheme that harmed more than 400 investors to the tune of over $49 million.
Woods was based in Atlanta. For years, he was president of Southport Capital, the fund manager for Horizon Private Equity III, and a minority owner of the Chattanooga Lookouts, an AA Minor League affiliate of the Cincinnati Reds (though the team cut ties after the fraud charges came to light).
Woods also worked for Oppenheimer & Co. from 2003 through 2016, according to his BrokerCheck profile.
While serving as a fiduciary for clients, Woods used money from new investors to pay expenses to previous clients while lying to investors about profitable returns, according to US Attorney Ryan K. Buchanan.
“Woods abused the trust of his victims, including retirees, seniors and military veterans, who lost their life savings and retirement accounts due to his greed,” he said.
Since 2006, Woods owned the Horizon Private Equity fund, which bought the RIA Southport Capital in 2008 (he placed a family member as the firm’s nominal manager before fully taking over in 2017, according to the DOJ).
Woods (and the Southport advisors under his direction) solicited investors for the fund, promising clients returns of 6% to 7% with investments in government bonds, stocks, real estate projects and other picks with, purportedly, minimal risk.
However, the money coming in from new clients wasn’t invested but used to pay previous investors to keep them off the trail of the fraud; according to the DOJ, the only way to pay the guaranteed returns for existing investors was to keep new investors coming into the fold.
Woods also concocted false monthly investor statements to obfuscate the fact that Horizon’s investments hadn’t made enough return to cover the interest. The Justice Department said he used some funds to purchase his stake in the Lookouts.
By 2021, Horizon’s investors were owed more than $110 million. That August, the SEC stepped in to stop what they deemed an “ongoing” Ponzi scheme. The commission said the Ponzi scheme had been in operation for more than a decade, with Woods and Southport continuing to raise more than $600,000 per month.
The commission barred Woods last year, as about 30 victims joined a suit against Oppenheimer & Co. for failing to put the brakes on Woods’ misconduct when he was an employee (the suit was later dismissed).
Last September, FINRA arbitrators ordered Oppenheimer to pay more than $35 million to some of Woods’ victims, with regulators arguing the firm violated FINRA rules, breached fiduciary duties and ran afoul of Georgia’s Racketeer Influenced and Corrupt Organizations (RICO) statute, among other allegations.
At the time, Oppenheimer & Co. vowed to file a motion to overturn the FINRA award (Oppenheimer refused a request to comment on this story).
Woods will spend seven years and eleven months in prison, with three years of supervised release to follow. Woods will also pay restitution for victims, the amount of which will be determined at a hearing scheduled for April 14.