A Cattle Based Ponzi Scheme
Ponzi schemes are frequent vehicles for fraudsters to make money – and investors to lose it. The device is simple enough to create and use. Typically, the fraudster offers shares of an investment for sale. The shares are frequently presented as having little to no risk. As the scheme continues the fraudster typically repays early investors with funds from those who put money into the scheme later.
The fraud can continue as long as the cash flow is sufficient to permit the fraudster to keep selling shares while repaying early buyers. When there is insufficient cash flow to keep the fraud going by repaying those demanding a return of their funds, the scheme collapses.
The Commission resolved a slightly different type of Ponzi scheme case as September drew to a close – one based on cattle. SEC v. Agridime, LLC, Civil Action No. 4:23-cv-01224 (N.D. Tex.). Named as defendants are the company, Agridime, and Jed Wood along with Joshua Link.
In January 2021 Defendants began selling investment contracts. The contracts were based on cattle. The process continued for the next couple of years. Investors were offered the chance to purchase cattle. Investors were told that if they purchased the agreements based on the cattle. for a fixed price per head after one year Defendants would repurchased the cows at a specific price per head that was 15% to 32% higher than the initial purchase price.
In reality, Defendants were not able to sell enough cattle to fulfill the obligations under the contracts. While some payments could be made there were insufficient funds to also cover all the obligations. Portions of the money raised were diverted to making Ponzi type payments. About $1.3 million was diverted to each Defendant.
The complaint alleged violations of Securities Act Section 5 and 17(a) and Exchange Act Section 10(b) and Rule 10b-5. On December 11, 2023, the court entered a temporary freeze order. Each defendant subsequently settled the action, consenting to the entry of permanent injections based on the provisions cited. In addition, Mr. Wood agreed to pay disgorgement of $1,959,309.67 along with $373,676.49 and a penalty of $236,451. Mr. Link agreed to pay disgorgement of $3,106,957.09 along with prejudgment interest of $693,251.87 and a penalty of $3,106,957.09. The company was ordered to pay disgorgement of $102,936,904 and prejudgment interest of $17,310,965.32. The disgorgement and prejudgment interest ordered against Agridime is deemed satisfied by the receiver’s collection efforts. See Lit. Rel. No. 26415 (Sept. 30, 2025).