SEC Charges Group With Running $1.2 Billion Ponzi Scheme

By:
Chris Gaetano
Published Date:
Dec 21, 2017
SECURITIES-AND-EXCHANGE-COMMISSION-facebook

The Securities and Exchange Commission charged the owner of a group of unregistered funds with looping thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme. The SEC complaint, unsealed today at a Miami federal court, accused Robert H. Shapiro, who ran the Woodbridge Group of Companies LLC, of defrauding more than 8,400 investors in the scam. The SEC said that Woodbridge's primary business was issuing loans to third-party commercial property owners that supposedly paid 11 to 15 percent annual interest, and promised investors 5 to 10 percent interest annually. However the SEC said that these companies that Woodbridge was presumably loaning to were almost all owned by Shapiro, and had no income and never made any of the interest payments he said they did. In classic Ponzi fashion, the SEC said Shapiro and Woodbridge used the money from new investors to pay off old investors, actively discouraging them from cashing out. Shapiro himself, according to the SEC, made $21 million from the scheme, which he used to do things like 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.

“We allege that through aggressive tactics, Woodbridge and Shapiro swindled seniors into a business model built on lies, which the SEC’s Miami Regional Office staff moved to halt,” said Stephanie Avakian, Co-Director of the SEC’s Enforcement Division.

The SEC’s complaint charges Shapiro, Woodbridge, and certain affiliated companies 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. A court hearing has been scheduled for Dec. 29, 2017 on the SEC’s request to continue the asset freeze.  The SEC’s motion for the appointment of a receiver over Woodbridge and the related companies is pending.  

 

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