Following a lengthy investigation, the U.S. Securities and Exchange Commission (“SEC”) recently announced charges and an asset freeze against the Woodbridge Group of Companies, LLC and its affiliated group of entities and funds (“Woodbridge”). The SEC has alleged that the unregistered funds and their owner, Robert H. Shapiro (“Shapiro”), operated a $1.2 billion Ponzi scheme that robbed thousands of investors of their investments. The SEC’s action follows upon Woodbridge’s recent bankruptcy filing in Delaware, which had stranded the funds of thousands of creditors.
SEC investigators filed its after obtaining court orders in fall 2017 that forced Woodbridge to open its books to regulators. The SEC conducted a forensic examination of Woodbridge’s books and concluded that Woodbridge was a fraudulent enterprise.
According to the SEC’s complaint, Woodbridge, formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds that promised above-market returns for investors who were told that they were funding lucrative, short-term real estate loans made to third-party borrowers. The SEC charges that Woodbridge’s business model was a sham and that – in classic Ponzi scheme fashion – the only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.
The SEC alleges that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers. While Woodbridge claimed it made high-interest loans to third parties, the SEC’s complaint alleges that the vast majority of the borrowers were Shapiro-owned companies that had no income and never made interest payments on the loans.
The SEC complaint further alleges that Shapiro and Woodbridge used investors’ money to pay other investors, and paid $64.5 million in commissions to sales agents who pitched the investments as “low risk” and “conservative.” Shapiro is alleged to have diverted at least $21 million for his own benefit, including chartering planes, paying country club fees, and buying luxury vehicles and jewelry. The scheme collapsed in typical Ponzi fashion in early December 2017, as sanctions for the sales of unregistered securities began piling up from state securities commissions across the United States and Woodbridge stopped paying investors, filing for Chapter 11 bankruptcy protection.
If you’ve invested in notes or funds with Woodbridge or have lost money as a result of Robert Shapiro and Woodbridge Group’s alleged Ponzi scheme, we are interested in speaking with you. Contact us for a free case review.