This week, it was announced that the Securities and Exchange Commission had charged a group of unregistered funds and their owner for swindling thousands of retail investors in a $1.2 billion Ponzi scheme. The SEC has also frozen the assets of the defendants. The actions were taken to prevent further dissipation of investor assets after the SEC obtained court orders in September and November in actions that forced the unregistered companies to open their books.
The SEC’s complaint alleges that Robert H. Shapiro and a group of companies called the Woodbridge Group of Companies LLC defrauded more than 8,400 investors in unregistered Woodbridge funds. The company was formerly based out of Boca Raton, Florida. The SEC complaint explains that Woodbridge advertised its primary business as issuing loans to third-party commercial property owners, who would pay Woodbridge 11-15% annual interest for hard money.
The company supposedly promised to pay investors 5 to 10 percent interest annually. The defendants are accused of attempting to persuade investors to stick around and avoid cashing out. The SEC’s complaint alleges that most borrowers of Woodbridge were companies owned by Shapiro. The companies allegedly had no income and never repaid the loans.
The SEC alleges that Shapiro and Woodbridge used investors’ money to pay other investors and to pay $64.5 million in commissions to sales agents. Robert H. Shapiro of Sherman Oaks, California is accused of diverting at least $21 million for his own benefit. The complaint explains that the scheme collapsed in early December as Woodbridge stopped paying investors and ultimately filed for Chapter 11 bankruptcy protection.
Additional details can be found here.