Horizon Private Equity III: Investors Can Still Recover Losses from Alleged $110 Million Ponzi Scheme
Investors in the alleged Ponzi scheme called Horizon Private Equity III may be able to recover their losses. Both an SEC complaint and a class-action suit allege that broker firm Oppenheimer & Co. did not do enough to protect their investors. This alleged Ponzi scheme was allegedly perpetrated by one of their own brokers, John Woods. Kurta Law is interested in speaking to any investors who may have been victims of this $110 million fraud.
There are possibly two types of misconduct involved in these cases:
Oppenheimer & Co. may have failed to supervise its representatives, as is required by FINRA rules. “Failure to supervise” refers to a firm’s obligation to supervise its investors and take reasonable actions to prevent financial misconduct.
Kurta Law is also investigating claims that brokers registered with Oppenheimer may have engaged in selling away. “Selling away” refers to a type of financial misconduct – brokers are not allowed to sell shares away from their registered firm. FINRA has this rule in place to prevent brokers from recommending shares without supervision. Investors who believe they lost money because an Oppenheimer broker engaged in selling away should contact Kurta Law for a free case evaluation.
The Case Against Oppenheimer
On August 31, 2021, investors filed a class-action suit against Oppenheimer and John Woods in the District Court for the Northern District of Georgia in Atlanta. The suit alleges that from 2008 to 2016, a group of Oppenheimer investment advisers, spearheaded by John Woods, persuaded clients to invest in Horizon Private Equity III. (According to John Woods’ Investment Adviser Public Disclosure, this alleged Ponzi scheme has gone on for over a decade.) In a Ponzi scheme, fraudsters use new investments to pay off earlier investors. Higher-ups in the scheme typically funnel investor money to their own bank accounts.
The SEC complaint alleges that John Woods solicited investments from 400 clients. Many of these were elderly retirees – elderly financial abuse is another major concern for regulators. John Woods allegedly promised his private equity fund came with attractive features, including low risk and an annual return of 6% to 7%. John Woods also allegedly promised the return of investor capital. Unfortunately for investors, John Woods only put a small portion of investor funds toward legitimate real estate investments. The rest allegedly went toward perpetuating the Horizon Private Equity III scheme.
John Woods resigned from Oppenheimer at the end of 2016. In order to prevent any more money from pouring into a fraudulent scheme, a federal court froze Woods’ assets on August 24, 2021.
Today, the fund allegedly has only $16 million out of the $110 million raised. The SEC alleges that Horizon Private Equity never had adequate funds to return their investors’ capital as brokers allegedly promised.
Who is Former Oppenheimer Financial Adviser John Woods?
John Woods (CRD #: 1949233) first registered as a broker in 1989 with Lehman Brothers in New York, New York. He has not registered as a broker since resigning from Oppenheimer & Co. in Atlanta, Georgia in 2016.
The Wall Street Journal reports that John Woods may have also raised money for his alleged Ponzi scheme through another investment advisory firm called Livingston Group Asset Management, which does business under the name Southport Capital.
Did Oppenheimer Fail to Supervise?
The class-action lawsuit alleges that Oppenheimer ignored red flags. In fact, the suit states, “Oppenheimer took steps to conceal the Ponzi scheme from the regulators and investing public by permitting Woods to quietly resign from Oppenheimer without reporting the wrongdoing to regulators and the investing public, as required by law.”
The SEC complaint alleges that Woods did not disclose his outside business activities with Horizon Private Equity III Fund or Southport Capital. According to the suit, however, John Woods’ Atlanta Southport office was next door to his Oppenheimer office, and he frequently traveled between the two offices. This indicates he made no real attempt to hide his involvement in an undisclosed outside business.
John Woods also allegedly regularly transferred investor funds from Oppenheimer investor accounts to Horizon Private Equity III. This should have prompted Oppenheimer to look more deeply into his business practices outside of the firm.
Why Did Investors File a Class Action Suit?
FINRA-regulated firms often include a pre-dispute clause that requires investors to agree to settle their disputes through arbitration. In FINRA arbitration, FINRA provides a panel of independent arbitrators to settle the dispute. These pre-dispute agreements, however, cannot prevent individuals from bringing a class action suit against a firm. Class action suits cannot be settled with FINRA arbitration.
Can I Still File an Arbitration Claim?
If you are not participating in the class-action suit, you can still seek to recover your losses through FINRA arbitration. Investors are still filing FINRA claims and are collectively seeking $1.4 million according to The Wall Street Journal.
Investors who may have lost money because of Oppenheimer & Co.’s failure to supervise should speak with a securities attorney to help them navigate the arbitration process. Call 877-600-0098 or email email@example.com.