On December 21, 2017, the Securities and Exchange Commission announced charges and an asset freeze against a group of unregistered funds and their owner who allegedly bilked thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme.

According to the SEC’s complaint, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC, formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds.

The SEC’s complaint alleges that Woodbridge advertised its primary business as issuing loans to supposed third-party commercial property owners paying Woodbridge 11-15 percent annual interest for “hard money,” short-term financing.  In return, Woodbridge promised to pay investors 5-10 percent interest annually.  Woodbridge and Shapiro allegedly sought to avoid investors cashing out at the end of their terms and boasted in marketing materials that “clients keep coming back to [Woodbridge] because time and experience have proven results.  Over 90% national renewal rate!”  While Woodbridge claimed it made high-interest loans to third parties, the SEC’s complaint demonstrates 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’s complaint states 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, of Sherman Oaks, California, is alleged to have diverted at least $21 million for his own benefit, including to charter planes, pay country club fees, and buy luxury vehicles and jewelry.  According to the complaint, the scheme collapsed in typical Ponzi fashion in early December as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection.

Shapiro, Woodbridge, and certain affiliated companies are charged with fraud and violations of the securities and broker-dealer registration provisions of the federal securities laws.  The SEC is seeking return of allegedly ill-gotten gains with interest and financial penalties. This law firm is accepting Woodbridge cases on a contingency fee basis. Financial Advisors who recommended Woodbridge may have failed to exercise due diligence, and may have errors and omissions insurance that would cover Woodbridge losses.