Southport Capital “Horizon Private Equity” Ponzi Scheme Update

Southport Capital "Horizon Private Equity" Ponzi Scheme Update

The number of investors swindled in the alleged Ponzi scheme masterminded by John J. Woods is understood to exceed 400. He was charged by federal regulators in August for defrauding investors by “running a massive Ponzi scheme for over a decade.” Along with Southport Investment Capital, an investment firm based in Chattanooga, Woods has been charged by the Securities Exchange Commissions (SEC) with six counts of securities fraud.

According to the complaint that led to the action, over $110 million was collected in investor money with the promise of returns of 6 to 7 percent. The funds were collected by a scheme known as Horizon Private Equity. The complaint went on to say that the scheme’s investments “are worth far too little for there to be any realistic prospect that the Ponzi scheme will be able to pay back existing investors their principal, let alone the promised returns.”

About John Woods

Woods grew up in East Ridge. He is believed to have invested heavily in local ventures that ranged from the minor league baseball team Chattanooga Lookouts to several real estate ventures spanning strip centers and the stores of Penney as well as Sears at Northgate Mall.

Livingston Group Asset Management, which did business as Southport Capital, a business advisory firm, was owned by Woods to the extent of 66%. This business has been valued at $34 million.

A $1.87 million purchase request by Chattanooga Lookouts for the 20.1% interest that Woods held in the team has been cleared by the receiver for approval of U.S. District Court Judge Steven J. Grimberg. The remaining assets of Woods, which includes investments in 13 ventures in Fort Oglethorpe and Chattanooga, are estimated at $21.2 million.

Receivership set up

A. Cotten Wright, the North Carolina attorney appointed as receiver, while expressing her inability to predict when the case might come to a close, plans to expedite the liquidation of assets, of which more than $55 million is in entities in and around Chattanooga. However, how long the process will take, including refunds to impacted investors, and when it might close, cannot be projected just as yet.

If any investor actually came out unscathed and made money in the investment was also difficult to assess at this point, she has apparently mentioned in her first quarterly report to a federal judge overseeing the U.S. Securities and Exchange Commission action against Woods. The received has set up a website in the case that can be accessed on A dedicated phone line, which has been getting calls, and an email ID have also been set up to ensure that investors are able to communicate with the receiver’s office.

The Claims process

Claims against Woods assets, which also include cash to the tune of $14.9 million, and the receiver’s review of them, will continue till they need to. Wright foresees setting up a process for the court’s approval, through which claims will be processed, including the process for distribution and a deadline for filing.

“Very unlikely” is the view at this stage of investors getting their entire principal amount back, as per the new website created by the received.

“The receiver will sort out what assets Horizon has that can be liquidated and secure the return of as much investor money as possible,” the website said. The receive also added that she will do “everything possible to maximize what she is able to return to investors.”

Woods’ response

Atlanta Attorney David Chaiken, who represents Woods, said that “the SEC’s allegations present only one side of the story” and that “we look forward to presenting Mr. Woods’ side in court, through the judicial process”

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