SEC Charges Three Advisers for Recommending Multi-Million-Dollar Ponzi to Clients
The Securities and Exchange Commission filed a civil action in a Georgia district court against Michael Mooney, Britt Wright, and Penny Flippen in connection with their participation in a Ponzi scheme.
The Securities and Exchange Commission filed a civil action in a Georgia district court against Michael Mooney, Britt Wright, and Penny Flippen in connection with their participation in a Ponzi scheme that raised more than $110 million from approximately 400 investors.
The trio, all former investment adviser representatives of Livingston Group Asset Management Company (doing business as Southport Capital), recommended that their clients invest at least $62 million in Horizon Private Equity III, a private fund controlled by John Woods, Southport’s former owner and manager. In August 2021, the SEC charged Woods and Southport with multiple counts of securities fraud for operating Horizon as a Ponzi scheme.
According to the SEC, many of the defendants’ clients were elderly and inexperienced investors who communicated that they wanted safe investment opportunities for their assets, a large percentage of which were earmarked for retirement.
The defendants, who reportedly received undisclosed compensation from Horizon, recommended that their clients invest in the fund based solely on Woods’ “unsubstantiated claims” about Horizon’s investment objectives, source of returns, and operations. They are also accused of ignoring “significant red flags,” such as Woods instructing the defendants not to use their Southport email addresses when communicating about Horizon.
The SEC further alleges that the defendants falsely told their clients that Horizon would use their funds to purchase safe investments; that Horizon would pay them a guaranteed rate of return of 6 percent to 8 percent; and that they could get their principal back without penalty.
In reality, Horizon earned very few profits from investments, and investor proceeds were used primarily to make principal and interest payments to earlier investors and to fund Woods’ personal projects, such as his purchase of a minor league baseball team.
“This case represents the Commission’s ongoing effort to hold accountable the people responsible for this egregious fraud,” the SEC said in its complaint.
The complaint charges Mooney, Wright, and Flippen with violating the antifraud provisions of various federal securities laws, as well as aiding and abetting Woods, Southport, and Horizon.
The SEC seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.
