The US Securities and Exchange Commission has filed financial fraud charges against the Woodbridge Group of Companies, LLC and its owner Robert H. Shapiro. The Woodbridge Group is comprised of unregistered investment companies. According to the regulator, Woodbridge and Shapiro ran a $1.2B Ponzi Scam that bilked over 8,400 investors, many of whom where older investors. At least 2,600 investors collectively spent close to $400M that came from their IRAs.
The civil fraud charges include other alleged federal securities law violations. The SEC also announced an asset freeze to keep more investor funds from dissipating. The regulator wants restoration of allegedly ill-gotten gains plus interest, as well as financial penalties.
Senior Financial Fraud
The Commission’s complaint accused Woodbridge and its owner of defrauding seniors using a “sham” business model that involved selling investments in unregistered Woodbridge funds. The company presented its main business as giving loans to third-party commercial property owners that were paying 11-15% in yearly interest for “’hard money’ short-term financing.” In fact, claims the SEC, the property owners were not third-parties but were companies belonging to Shapiro. Not only that but they had no income streams and never paid interest on these supposed loans. Woodbridge and Shapiro are said to have used investor money to buy nearly 200 commercial and residential properties in California and Colorado.
Investors were sold two primary kinds of securities, including First Position Commercial Mortgages (12-to-18-month term promissory notes bearing 5-8% interest—also referred to as FPCM Investments) and 5-year term private placement fund offerings.
FCPM investors were not assessed in terms of whether they were “accredited” or “sophisticated” or had any financial investment experience or education. Instead, potential investment leads were generated quickly in order to garner “low hanging, easiest to harvest fruit.”
Woodbridge and Shapiro touted a more than 90% renewal rate nationwide and allegedly tried to prevent investors from cashing out when the terms of their agreements were over. They purportedly did this through re-enrollments and extensions.
Woodbridge and Shapiro allegedly used at least $322M of investors’ money to pay other investors. Also, investors’ funds were commingled.
Meantime, Shapiro is accused of giving himself at least $21M of investors’ funds to support his lavish lifestyle. Sales agents who claimed the Woodbridge funds were “conservative and “low risk” received $64.5M in commissions. $44M was allegedly used to cover payroll while $172M paid for operating costs.
The SEC said that Woodbridge’s sales team included 30-in house staff and hundreds of external sales agents, with “virtually” none of the agents registered with any regulator. Social media, cold calling campaigns, newspaper ads, seminars, websites, and in-person presentations were allegedly used to solicit investors for money.
Woodbridge stopped paying investors on December 1. It then filed for bankruptcy. The alleged Ponzi scam is said to have run from 7/12 through at least 12/4/17. Woodbridge still owes investors $961M in principal.
If you are someone who invested in the Woodbridge funds, including FPCM Investments, contact Shepherd Smith Edwards and Kantas, LTD LLP today. An FPCM Investments fraud lawyer at our securities law firm would be happy to help you explore your legal options. If you are and older investor who suffered losses in the Woodbridge funds, contact one of our senior financial fraud lawyers today.
More Blog Posts:
Woodbridge Files For Bankruptcy, Misses Payments Due to Investors, December 4, 2017
$5.4M Elder Investment Fraud Allegedly Involved Penny Stocks, November 29, 2017
Ex-Nomura Holdings Manager Gets Prison Time for Insider Trading, Institutional Investor Securities Blog, November 25, 2017