Notable litigation filed during March 2023 includes: (1) SEC v. Woodard; (2) SEC v. Kaplan; (3) James Bay Resources Limited, et al. v. Lockett & Horwitz, et al.; (4) Miklos v. McNamara, et al.; and (5) Scura, et al. v. Heppner, et al.

SEC v. Woodard, Civ. No. 1:23-cv-00112 (D. HI.).

The SEC filed suit against Defendant Steven Keith Woodard, an unregistered investment adviser, in Hawaii federal court for losses arising from an alleged Ponzi scheme involving his unregistered offering of securities in the form of promissory notes. The complaint alleges that Defendant, through Morganwood Ltd., an entity he controlled, raised approximately $6 million from approximately 30 purchasers of promissory notes. Defendant represented that he employed a proprietary day-trading strategy that was assured to avoid risk, preserve capital, and generate impressive returns. In reality, Defendant invested relatively little of the amount he raised from investors and lost virtually all of what he did invest through risky trading strategies diametrically opposed to the ones he had promised to employ. The SEC seeks recovery for violations of Sections 10(b) and 17(a) of the Exchange Act, Sections 5(a) and 5(c) of the Securities Act, and Sections 206(1) and 206(2) of the Advisers Act.

SEC v. Kaplan, Civ. No. 2:23-cv-01648 (E.D.N.Y.).

The SEC filed suit against identical twin brothers, Adam Kaplan and Daniel Kaplan, in New York federal court for losses arising from an alleged Ponzi scheme in which Defendants overcharged clients for advisory fees. Specifically, Defendants fraudulently inflated the fee amounts in clients’ advisory agreements without the clients’ knowledge or consent. The SEC further alleges that Defendants made misrepresentations, falsified documents, and made Ponzi-like payments to clients to conceal their fraudulent activities, including misappropriating client funds by fraudulently applying charges to clients’ credit card and bank accounts for purported investments or advisory fees to which Defendants were not entitled. The SEC seeks recovery for violations of Section 10(b) of the Exchange Act and Sections 206(1) and 206(2) of the Advisers Act.

James Bay Resources Limited, et al. v. Lockett & Horwitz, et al., Civ. No. 30-2023-01313001 (Cal. Super. Ct.).

Ponzi victims filed suit against Defendants Lockett & Horowitz, a professional law corporation, and one of its shareholders, John Armstrong, in California Superior Court for losses related to a Ponzi scheme that implicated Defendants, who served as legal counsel and assured Plaintiffs of the legitimacy of several vape pen companies (“Borrowers”), which served as collateral for Plaintiffs’ $4 million investment in the form of a series of loans to the Borrowers. The complaint alleges that, after the Borrowers defaulted on Plaintiffs’ loans, law enforcement investigated the Borrowers, resulting in the SEC filing a complaint on May 5, 2022. After reading the SEC complaint, Plaintiffs learned they had been the victims of a Ponzi scheme and that the Borrowers were sham businesses. Plaintiffs seek recovery under theories of breach of contract and breach of fiduciary duty.

Miklos v. McNamara, et al., Civ. No. 2023-L-2633 (Ill. Cook Cir. Ct.).

Ponzi victims filed suit against John McNamara and his company, McNamara Capital Investment Group, LLC, in Illinois state court for losses arising from an alleged Ponzi scheme in which Defendants invested Plaintiff’s retirement savings and other assets in a sham company called Premier Factoring. The complaint alleges that McNamara and his company acted as investment advisors and failed to perform proper diligence when investigating Premier prior to recommending it to Plaintiff. According to Plaintiff, at the time McNamara advised Plaintiff to invest in Premier, Premier was a worthless entity. Plaintiff seeks recovery under theories of negligence, breach of fiduciary duty, misrepresentation, and violation of Illinois securities laws.

Scura, et al. v. Heppner, et al., No. 3:23-cv-00680 (N.D. Tex.).

Ponzi victims filed suit against individuals and their businesses for losses arising from a scheme operated through GWG Holdings, Inc. (“GWG”), a company that purported to sell investments in beneficial interests in life insurance policies but which, in reality, operated like a Ponzi scheme.  Plaintiffs allege that after Defendant Brad Heppner took over GWG, over $1.2 billion of investor funds were diverted to schemer’s personal accounts, new startup businesses, and for payment of unrelated debts.  The complaint alleges that after an SEC investigation, GWG was forced to stop selling securities and was unable to keep new funds flowing in to repay investors—necessitating GWG to file for bankruptcy.  Plaintiffs seek recovery on behalf of a class of investors under federal securities laws.

Photo of Alec Covington Alec Covington

Alec has broad experience in complex litigation, with emphasis on financial services litigation and regulation, insurance coverage, and business torts. He has also handled disputes at the trial and/or appellate level involving mergers and acquisitions, trade secret disputes, shareholder derivative and class action…

Alec has broad experience in complex litigation, with emphasis on financial services litigation and regulation, insurance coverage, and business torts. He has also handled disputes at the trial and/or appellate level involving mergers and acquisitions, trade secret disputes, shareholder derivative and class action suits, as well as construction litigation. He currently manages a series of lending disputes and regulatory matters for multiple lenders, including large and midsize businesses. His clients span a wide variety of industries and have included Fortune 100 companies, small and midsize businesses, individuals, and nonprofit institutions.

Photo of Katelyn M. Fox Katelyn M. Fox

Kate focuses her practice on financial services litigation in both state and federal courts nationwide.