Commission Files Another Ponzi Scheme Case

Since the days of Madoff the Commission has filed what seems like a steady stream of Ponzi scheme cases. The cases are generally similar – some involve persons supposedly running an investment operation; others center on the sale of shares of a company that is supposed to be the next greatest thing. All center on investors being convinced to put their money into the investment; all involve the promoter essentially leaving town with the investor cash or losing it in bad investments. Despite the repetition of the schemes, the repetition of the Commission cases and the repetition of the investor losses the cases keep coming. The latest is SEC v. Woodward, Sr., Civil Action No. 1:23-cv-00112 (D. Hawaii Filed March 1, 2023).

Steven Keith Woodward, Sr. is the sole defendant in this investment fraud action. He has been a registered representative with four registrants. He has been a registered investment adviser and terminated by a broker-dealer for failing to comply with its advertising rules. The same year the Hawaii Business Registration Division sanctioned him for giving investment advice that was misleading.

Beginning in 2016, and continuing for the next four years, Defendant operated Morganwood Ltd. which he also controlled. The firm issued promissory notes over the period, raising $6 million from about 30 investors. Investors were assured Mr. Woodward had a history of making safe investments with returns of 15% to 30% per year. Investments were also insured investors were assured by Defendant Woodward.

In reality, the investor funds were put into risky investments; virtually all investments turned into losses. During the years the scheme continued Defendant Woodward kept the majority of the funds liquid. That permitted him to pay fantom returns to some investors as monthly payments. Other investors were furnished with false account statements. Eventually, there was insufficient cash to make even small payments to investors. In July 2021 Mr. Woodard penned a letter to investors stating that all the money was gone. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and 206(2). The case is pending. See Lit. Rel. No. 25654 (March 1, 2023).