The Securities and Exchange Commission (SEC) has taken action against Steven Keith Woodard Sr., a former investment advisor and broker, for his alleged involvement in a $6 million Ponzi scheme. Woodard, based in Kihei, Hawaii, has agreed to a ban from the industry without admitting or denying the commission’s findings.
Deceptive Sale of Unregistered Securities
Woodard’s scheme revolved around the sale of unregistered securities in the form of promissory notes to investors. Shockingly, many of these investors were clients of his own fee-based advisory firm, Morganwood. Woodard reportedly lured investors by falsely claiming a history of annual returns ranging from 15% to 30%. Furthermore, he deceived them by assuring that their investments would be insured.
Failed Promises and Risky Trading Strategies
Contrary to his promises, Woodard actually invested only a small portion of the funds raised from investors. His trading strategies became increasingly risky, deviating significantly from the conservative approach he had initially promised. Consequently, he suffered substantial losses, essentially squandering what little he did invest. Instead of acknowledging these failures, Woodard resorted to using new investors’ money to pay off those who requested monthly payments.
Fictitious Statements and Deteriorating Finances
To maintain the illusion of success and keep investors at bay, Woodard issued fabricated statements reflecting gains that hadn’t materialized. However, as losses accumulated and the situation worsened, Woodard found himself unable to fulfill his promises. In December 2020, he faced a $1.5 million default judgment from the estate of a defrauded client. The following July, Woodard penned a letter to all his investors, admitting that their funds had been lost.
The SEC filed its initial complaint against Woodard in March, lodging it with the US District Court in Hawaii. The Commission’s investigation revealed the extent of Woodard’s deceptive practices and prompted his subsequent industry ban. # Unveiling a Deceptive Investment Scheme
The Securities and Exchange Commission (SEC) has uncovered a fraudulent investment scheme orchestrated by an individual named Woodard. Woodard utilized various names for his investment funds, such as the “Tangible Economy Fund” and the “Hi-Income Fund,” according to the SEC. However, these names held no real meaning or investment objective. Woodard would pool investor funds into two separate brokerage accounts at Morganwood, mingling them together without any restrictions. It is important to note that Woodard failed to register these funds with the SEC and did not adhere to the agency’s criteria for accredited investors.
Between 2016 and 2020, Woodard managed to deposit a staggering $5.9 million from investors into Morganwood’s bank account through promissory notes. Subsequently, he transferred $2 million into Morganwood’s brokerage account. Unfortunately, by March 2023, only $142 remained in the account due to significant trading losses. This dire situation prompted the SEC to file a complaint against Woodard.
Disturbingly, aside from trading losses, the SEC has also discovered that Woodard misappropriated investor funds for personal expenses. These expenses encompassed mortgage payments, charitable donations, taxes, and even a hefty $430,000 salary paid to his wife for her work with Morganwood.
The SEC claims that Woodard’s ill deeds were exposed when a court issued a judgment against him in December 2020. Consequently, Woodard was obliged to inform investors about his dire financial predicament in a letter. Astonishingly, this was the first time investors became aware of Woodard’s trading losses and the lawsuit filed against him.
This investigation serves as a stark reminder of the importance of due diligence when considering investment opportunities. The repercussions of Woodard’s actions not only impacted the financial stability of his victims but also revealed significant flaws within the regulatory framework. It is crucial that investors exercise caution and consult reputable financial advisors to safeguard their financial well-being.
