Three former financial advisors who worked with a broker in Georgia who ran a Ponzi scheme for more than a decade were barred on Wednesday from the securities industry by the Securities and Exchange Commission.
The three advisors are: Michael Mooney, Britt Wright and Penny Flippen.
Dating as back as 2010, each worked for several years at Southport Capital, a registered investment advisor in Chattanooga, Tenn., which was also the firm of John J. Woods, a veteran broker who earlier this year was sentenced in federal court in Atlanta to nearly eight years in prison for operating a 13-year Ponzi scheme that victimized more than 400 investors and caused a loss of over $49 million.
None of the three former financial advisors were charged in the federal criminal case. The three could not be reached on Thursday to comment.
The SEC's complaint alleged that Mooney, Wright and Flippen, in connection with the sale of interests in a fund called Horizon Private Equity III and while working at Southport Capital, made false statements to investors and otherwise engaged in conduct which operated as a fraud and deceit on investors. Each also consented to the SEC's order barring them from the securities industry.
The SEC alleged in 2021 that Horizon Private Equity III was a Ponzi scheme posing as a private equity fund. The Department of Justice then followed with its criminal charges.
Although Woods did not use the money to live a lavish lifestyle, according to the Department of Justice, he diverted investor funds to pet projects not approved by the investors, such as purchasing an interest in a baseball team, the Chattanooga Lookouts, in his name.
"Ponzi schemes are done in the open by bad people," said Brandon Reif, an industry attorney. "There are many signs and breadcrumbs along the way, like when the kingpins spend other people’s money on lavish lifestyles and personal luxury items, including sports teams."
"Every investment professional, from the portfolio manager to the file clerk, has a duty to escalate to management any signs of criminality or misuse of investor money," Reif added.
Woods was a broker with Oppenheimer & Co. Inc. from 2003 to 2016, according to his BrokerCheck profile. Investors have brought several arbitration claims against Oppenheimer related to Woods and Horizon Private Equity III, most notably winning a 2022 claim against the firm that totaled $36.7 million.
Several months later, that award was vacated in a Georgia state court, with the investors harmed by Woods' Ponzi scheme and Oppenheimer reaching an agreement, InvestmentNews reported last year.
ASA reacts as regulator drops no-deny policy, freeing firms and individuals to publicly dispute allegations after reaching settlements.
Joel Frank allegedly sold more than $39 million worth of investments in the Equilus Funds to more than 90 investors,
The Charity Parity Act would eliminate a costly IRA rollover requirement that blocks direct charitable transfers from workplace retirement plans.
A last-minute court filing ends a case against the federal tax-collecting agency that had drawn unprecedented conflict-of-interest questions from Democratic critics.
Advisors discuss their use of AI now and how it will change going forward
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
