SEC Charges Hawaii Investment Adviser with Running Ponzi Scheme
Securities and Exchange Commission v. Stephen Keith Woodard, Sr., No. 1:23-cv-00112 (D. Hawaii filed Mar. 1, 2023)
SEC Litigation Release No. 25654 / March 1, 2023
On March 1, 2023, the Securities and Exchange Commission charged Stephen Keith Woodard, Sr., an unregistered investment adviser, with running a Ponzi scheme in which he offered and sold securities to more than two dozen victims, many of whom he solicited through his church.
The SEC's complaint alleges that, from 2016 to mid-2021, Woodard raised approximately $6 million from about 30 purchasers of promissory notes issued by Morganwood Ltd., an entity he controlled. According to the complaint: Woodard told investors, some of whom were also his investment advisory clients, that he employed a risk-free trading strategy that focused on the preservation of capital but still yielded impressive returns. However, as alleged in the complaint, Woodard invested only a small amount of investor capital, made increasingly risky bets on the market, and sustained heavy losses. The complaint further alleges that Woodard used the majority of investor monies to pay investors phantom returns on their investments, and that instead of disclosing his mounting trading losses, Woodard provided his investors with false account statements showing illusory gains in the value of their investments.
The SEC complaint, filed in federal district court in Hawaii, charged Woodard with violating the antifraud and registration provisions of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks a permanent injunction, disgorgement with prejudgment interest, and a civil penalty.
The SEC's investigation was conducted by Peter Del Greco and supervised by Marc Blau of the Los Angeles Regional Office. The SEC's litigation will be led by Stephen Kam.