The Securities and Exchange Commission filed a complaint against former Oppenheimer & Co. broker John Justin Woods for running a massive Ponzi scheme that still owes $110 million in principal to over 400 investors across 20 states. As a former registered representative with Oppenheimer, the firm may similarly be on the hook to clients for failing to them about Woods' conduct both before and after he left the firm.
According to the SEC Complaint, John J Woods (CRD #1949233) continues to run his ongoing Ponzi scheme called Horizon Private Equity III, LLC. The SEC states that most victims are elderly retirees who were preyed upon by Woods and other investment advisers at Livingston Group Asset Management Company, also called Southport Capital.
Insofar as Woods' time at Oppenheimer is concerned, a class action complaint alleges Woods brazenly set up an office for Horizon Private Equity directly next door an Oppenheimer branch. If the firm failed to detect such misconduct or failed to quash such miscondut, it may be responsible for supervisory failures. This wouldn't be out of the ordinary for Oppenheimer, as FINRA has penalized the firm millions of dollars over the years for supervisory deficiencies.
The Law Offices of Jonathan W. Evans & Associates is pursuing Oppenheimer via arbitration for the identical issue, failing to warn its customers of a representatives misconduct. In the pending arbitration, it is alleged that Oppenheimer failed to warn its clients when a broker over-concentrated multiple clients’ accounts in high risk securities and let him quietly depart, with the clients, to start a new investment advisory business.
In 2015, FINRA Vice President and Chief of Enforcement Brad Bennett characterized Oppenheimer's deficiency as a "lax supervisory structure" as part of a sanction that included $3.75 million in fines and restitution for failing to supervise barred broker Mark Christopher Hotton, who stole money and excessively traded in customer brokerage accounts.
Among the SEC's charges against Woods is that the former Oppenheimer stockbroker told clients they would receive guaranteed 6-7% interest for two or three years in Horizon, but instead used new investors' money to pay guaranteed returns to existing investors, as Horizon to date has not earned significant profits from legitimate investments. In other words, the SEC alleges Horizon is a fraudulent Ponzi scheme that remains ongoing and that the longer Horizon continues its fraudulent operation, the worse off its victims—including many elder and senior investors, including Oppenheimer customers—will be. The SEC seeks an asset freeze and "believes that additional victims are being defrauded on a daily basis."
Oppenheimer, thus, may be liable for failing to warn its clients that a broker associated with the firm may have—both during their time with the firm and afterward—engaged in fraudulent conduct that caused Oppenheimer customers to lose money.
As for Woods, in 2008, an Oppenheimer customer reached a settlement after alleging that Woods unauthorized trades in his account. Woods' defense was that he "mistakenly believed he had discretion over client's account." Mistake or otherwise, the settlement exceeded $16,000.
If you invested with Oppenheimer broker John Woods or with any financial adviser or representative at Oppenheimer or anywhere else whose solicitation to invest in Horizon Private Equity or another alleged fraudulent Ponzi scheme, and the firm's failure to warn about conduct has resulted in damages, losses, or otherwise proven harmful to your investments or interests, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for a consultation.