Source: Jeff Beach - North Dakota Monitor
A North Dakota rancher said he is working on a deal for a small group of investors to take over a cattle and beef marketing business that was labeled a Ponzi scheme and owes North Dakotans millions of dollars.
Wylie Bice, who ranches near Killdeer, said the group is close on a final price for Texas-based Agridime, with the goal of making it an asset to North Dakota ranchers.
Bice said he hopes the group can close on a deal by July 1 to take over Agridime facilities in Texas, Arizona and Kansas. He said he hopes North Dakota can supply about 60% of the cattle that the business will need – about 10,000 head per year.
Bice, who is among the investors who lost money with Agrdime, said the group includes a former business partner of his who is in Texas and would come out of retirement to help manage the company.
In December, the Securities and Exchange Commission accused the company of operating as a Ponzi scheme by taking money from new investors to pay off previous investors instead of investing that money into cattle. The cattle were to be fed until reaching market weight and then processed. Agridime would then market the meat directly to consumers.
A court-appointed receiver has been trying to determine what assets remain for the company that owes millions of dollars to investors and cattle producers in 14 states.
In the first quarterly report, posted May 1 on the Agridime.com website, the receiver, Steven Fahey of Texas, said it was involved in “serious discussions with a North Dakota-based investor group.”
The group would purchase the assets of the company, including the remaining meat and cattle inventory. The report said a sale could be submitted for court approval by mid-June.
The retail and wholesale meat business would continue under the American Grazed Beef name. Meat sales were moved from the Agridime site to a site using the American Grazed Beef name.
Bice said it was not likely to move any operations to North Dakota, instead using the existing warehouses in Texas, Arizona and Kansas that are closer to large retail markets such as Dallas-Fort Worth and Phoenix.
“I like the concept of it,” Bice said. “Their online plan was really good.”
While operating as American Grazed Beef, “the company has been doing pretty decent for just idling along,” Bice said.
The report notes that the number of Agridime employees has dropped from 83 to 40 while under receivership.
More Bang?
Bice said it is possible the company could again involve Taylor Bang. Bang is a longtime cattle broker from Killdeer who also operated as a sales agent for Agridime.
“He’s a very good salesman, and I sure hope he can stay involved with us,” Bice said.
The North Dakota Securities Department said Bang earned $6 million in commissions from unregistered cattle investment contracts through Agridime.
Bang told the North Dakota Monitor in December that the figure was “way high.”
Agridime offered people the chance to invest in the cattle industry, offering returns of as much as 30% without having to do the work involved with raising and marketing cattle.
Agridime said the money would be invested in calves that would be raised for beef sales. But investors were not actually buying cattle or given information, such as ear tag numbers, about the calves they were investing in.
The Securities and Exchange Commission said in its complaint that Agridime executives started using that investment money for other purposes instead of investing in cattle, turning the operation into a Ponzi scheme.
A Securities Department official estimated that North Dakotans have lost about $40 million in Agridime investments.
The quarterly update also includes lists of transactions, assets and creditors, though addresses are not included with the creditors.
The creditors list includes Bice and Bang and several others with the last name Bang.
Feds call $20 million in meat Agridime’s most valuable asset
North Dakota Agriculture Commissioner Doug Goehring said that while Agridime’s license to buy cattle in the state has been revoked, Bang still has a license to broker cattle as an individual.
Goehring said he thought the idea of buying out Agridime was “odd.”
“Why would you not just start over?” Goehring wondered.
Bice said money from the sale of the company would go to paying off creditors.
If there is no deal, the receiver said it would likely submit a liquidation plan by July 31.
Bice said he has visited the Agridime facilities and is excited about the possibility.
“Usually, I’m invested in stuff I know nothing about,” Bice said. “I know something about this.”
In other Agridime developments:
Assets: The May 1 update from the receiver says, as of March 31, there were about 3,387 head of cattle on feedlots in several states. The receiver in February said there were about 6,500 head of Agridime-owned cattle.
The update notes that “records as to the quantity and location of its cattle were sparse and poorly maintained.”
The update says there were about 841,000 pounds of beef stored at Agridime’s warehouses in Arizona, Kansas and Texas as of March 31.
Lawsuit: Another federal agency announced May 14 that it is taking legal action against Agridime.
The Commodity Futures Trading Commission said it has filed a civil enforcement action in the U.S. District Court for the Northern District of Texas against Agridime and its founders, Joshua Link and Jed Wood.
The CFTC said it is seeking restitution for defrauded customers, civil penalties, trading bans, and a permanent injunction against further violations of the Commodity Exchange Act and the agency’s regulations.
The CFTC says Agridime received more than $161 million from over 2,000 customers in 14 states. That is $30 million less than the SEC’s estimate of $191 million in its complaint filed in December.
Judgment: The Securities and Exchange Commission in April obtained a judgment on Link and Wood that prevents them from selling securities. The SEC will determine a civil penalty in the future.
The receiver posted on Agridime.com that this is a good result for the SEC, the investor victims, and for the receivership proceedings.
