Fort Worth Texas is still known as “cow town” here in the Lone Star State. Well, at least among non-cattle people it is. When you visit the stockyards, you can still enjoy a cattle drive—the urban version of one. Seriously, Texas does boast some of the best cattle genetics in the world. Unfortunately, Josh Link of Gilbert Arizona and Jed Wood of Fort Worth gave the cattle industry a black eye with an alleged Ponzi scheme perpetuated through Agridime, LLC.
Longhorn Cattle Drive at the stockyards of Fort Worth, Texas, USA
Where’s the Beef?
Financial fraud is rampant in the gold and silver market, cryptocurrency, in traditional financial investments, oil and gas and real estate. But this may be the first Ponzi scheme in recent memory involving cattle contracts. The SEC recently obtained a TRO against Link, Wood and Agridime, LLC. While the merits of the case have not been adjudicated, the financial fraud claims don’t look good. Since 2021, “the defendants have raised at least $191 million from more than 2,100 investors in at least 15 states by offering and selling investments related to the supposed purchase and sale of cattle.” SEC Press Release
$191 million is a lot of beef. Or, it would be a lot of beef if the cows were in the barn or pasture.
Using social media and internet advertisements, Agridime sold investment contracts for the purchase and sale of cattle. Agridime guaranteed investors “annual returns ranging from 15% to 32%” marketing the Cattle Contracts “as a way for investors to passively profit from cattle ownership ‘without having to do all the work.’” In an ironic twist, “the Defendants boasted, ‘We know it sounds too good to be true.’” SEC Complaint
At first glance, you might wonder what’s the problem? Seeking investors for capital to grow a beef cattle operation in a time when beef prices are soaring and the demand for grass fed and finished meat is high seems like a good idea. “Agridime agreed to (a) sell cattle to an investor for $2,000 per calf; and (b) after a year, buy back the same cattle at a higher price to provide a specific guaranteed investment return. Agridime told investors it would use their funds to purchase, feed, finish, process, and sell specific cattle.” SEC Complaint Later, Agridime solicited financial investments of $4,500 for the purchase of one bred cow which Agridime would manage on its property.
Unfortunately, “Agridime has acquired far fewer cattle than it has sold to investors in Cattle Contracts. . . . Agridime has not generated-and cannot generate—sufficient revenues to repay its investors. As a result, Agridime does not have the assets needed to cover its obligations.” Was Agridime unable to secure more cattle? The situation would usually call for a company to file bankruptcy. Why would the SEC be involved?
Ponzi Scheme
For nine months, ending in September 2023, Agridime used “$58 million in investor funds from the sale of new Cattle Contracts to make principal and profit payments to previous investors. In short, Agridime is operating a Ponzi scheme.” Cash on hand in September was $1.5 million, at a time when Agridime was facing future principal payments and profits of $147 million. SEC Complaint
Warning Signs
Several warning signs in addition to the Ponzi payments led to the SEC getting involved.
- Agridime failed to disclose to investors the 10% sales commission paid to owners and sales people, totaling more than $11 million.
- In April 2023 the State of Arizona issued a temporary cease and desist order for the purchase and sale of securities. North Dakota followed suit in May. Agridime ignored the orders and continued to execute contracts. They sold one million dollars in Arizona in contempt of the order, and nine million dollars in North Dakota.
- At the time the SEC asked for an injunction, Agridime was still selling contracts in several states.
Despite the long history of Ponzi schemes, investors still land in these well-laid traps. We hope all your real estate, commodities, foreign exchange, crypto-currency and oil and gas investments are safe and profitable. But if you find yourself searching for an experienced oil and gas litigation lawyer or a commercial litigation lawyer, Mark A. Alexander, P.C. is here to help.
