Woodbridge and Its Ex-Owner Must Pay $1B Over Alleged Ponzi Scam

Originally published by P. Clarkson Collins Jr..

A federal court has ordered the Woodbridge Group of Companies and its former CEO and owner Robert H. Shapiro to pay $1B in disgorgement and penalties for allegedly running a $1.2B Ponzi scam that victimized 8,400 retail investors, including many senior investors who ended up losing their retirement money. Of this $1B, Woodbridge and its 281 related companies must pay $892M in disgorgement. Shapiro must disgorge $18.5M in ill-gotten gains, as well as pay $2.1 in prejudgment interest and a $100M civil penalty.

In 2017, the US Securities and Exchange Commission (SEC) filed charges against Woodbridge, which it called a “group of unregistered investment companies,” and other defendants. The regulator contends that Woodbridge claimed that its main business was to issue loans to third-party commercial property owners. The defendant allegedly promised investors 5-10% in interest yearly. The company’s marketing materials touted an “over 90% renewal rate” from investors because of “proven results.”

The SEC said that the reality was that most of these supposed third-party borrowers were, in fact, companies that Shapiro owned. They purportedly made no income and did not pay interest on any of these supposed loans.

The regulator accused Woodbridge of using investors’ funds to pay other investors, as well as $64.5M in sales commissions to agents that had touted the Woodbridge investments as “conservative” and “low risk.” Shapiro is accused of using at least $21M of investor funds to support his lavish lifestyle. The Ponzi fraud fell apart after payments to investors stopped and Woodbridge filed for bankruptcy.

All the defendants and relief defendants named in the SEC’s case have settled but without denying or admitting to the regulator’s allegations. A Liquidation Trust that is being set up in the Woodbridge Chapter 11 bankruptcy case will be responsible for satisfying the disgorgement order.

Here are some of the companies, aside from Woodbridge Group of Companies, that are defendants in the SEC’s Ponzi fraud case:

• Woodbridge Structured Funding WMF Management
• Woodbridge Mortgage Investment Funds 1, 2, 3, 3A, and 4
• Woodbridge Commercial Bridge Loan Funds 1 and 2
• 142 Woodbridge-Affiliated Property LLCs
• 130 Woodbridge-Affiliated Holding LLCs

Shapiro is now permanently barred from associating with brokers, investment advisers, municipal advisers, and others in the securities industry. He also is banned from taking part in any penny stock offerings. His wife, Jeri Shapiro, is a relief defendant in the case. The SEC has ordered her to disgorge almost $1.4M and pay nearly $165K of prejudgment interest.

Other relief defendants in the case also settled without denying or admitting to the SEC’s allegations. They were ordered to pay $5.2M in ill-gotten gains with interest.

Ponzi Fraud Lawyers
Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) works with investors that have lost money because they fell victim to a Ponzi scam. Unfortunately, senior investors are a favorite target of Ponzi scammers because many of them have retirement funds and savings. Over the years, SSEK Law Firm helped thousands of clients in getting back their financial losses caused by broker fraud, investment adviser fraud, and other kinds of securities fraud. Call or email SSSEK Law Firm today if you were an investor that lost money in the Woodbridge Ponzi scam. Our Woodbridge fraud attorneys can help you explore your legal options.

Read the SEC’s Final Judgment in the Woodbridge Case

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