SEC uncovers $191m cattle Ponzi scheme in Texas

“The defendants enticed investors with guarantees that they could ‘make money raising cattle without having to do all the work,’ but as we allege in our complaint, their promises of annual returns of 15‑32% were, in the defendants’ own words, ‘too good to be true,’” says Eric Werner, director of the SEC’s Fort Worth Regional Office.

According to the SEC’s complaint, filed on Dec. 11, 2023, in the U.S. District Court for the Northern District of Texas and unsealed on Dec. 13, 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.

One contract scenario allowed an investor to purchase a calf for $2,000. After a year, Agridime said it would buy back the same cattle at a higher price to provide a specific guaranteed investment return. Agridime told investors it would use funds to purchase, feed, finish, process, and sell specific cattle. Instead, Agridime diverted the funds to make Ponzi payments to prior investors and had not purchased enough cattle to fulfill its cattle contracts.

Agridime's investors did not actually invest in specific, identifiable animals, the complaint notes. “Instead, the success of their investments depends on the success of Agridime's purported cattle operation, including its ability to attract new investors.”

The SEC complaint further notes that since at least August 2023, Agridime offered a new contract option, soliciting investments on its website of $4,500 "for the purchase of one bred cow in [Agridime's] supply chain and [for Agridime] to feed that cow until it gives birth to its calf. This cow will remain on [Agridime's] ranches & will be fed and cared for during this time."

Under this contract, the investor still did not take delivery of any cattle and assumed no responsibility for their care or feeding.

The complaint alleges that, since December 2022, the defendants have used at least $58 million of new investor funds to make Ponzi payments to prior investors and more than $11 million to pay undisclosed sales commissions to Wood, Link, Link’s wife, and other Agridime sales representatives.

The SEC complaint further relays Agridime has violated cease-and-desist orders issued earlier this year by Arizona and North Dakota by continuing to sell its securities in fraudulent, unregistered transactions in those states. Agridime sold more than $1 million of cattle contracts to Arizona residents since the entry of the Arizona order and more than $9 million to North Dakota residents since the issuance of that state's order. Further, on October 18, 2023, an Agridime salesman in Arizona admitted under oath that he had continue to sell cattle contracts from Arizona.

The SEC’s complaint charges the defendants with violating the antifraud and registration provisions of the federal securities laws. In addition to the emergency relief granted by the court, the SEC is seeking preliminary and permanent injunctions, disgorgement, prejudgment interest, civil penalties, and officer and-director bars against Link and Wood. The court has scheduled a hearing for Dec. 20, 2023, on the SEC’s motion for a preliminary injunction.

The SEC’s ongoing investigation is being conducted by enforcement staff in the SEC’s Fort Worth and Atlanta regional offices, with assistance from the Arizona Corporation Commission, the North Dakota Securities Department, the Oklahoma Department of Securities, and the Texas State Securities Board.