Woodbridge, Owner Ordered to Pay $1 Billion for Ponzi Scheme
A federal judge in Florida ordered Robert H. Shapiro and his bankrupt Woodbridge Group of more than 280 high-interest loan companies to pay $1 billion in penalties and disgorgement for operating a Ponzi scheme.
The Securities and Exchange Commission in December 2017 froze the assets of the Boca Raton, Fla.-based Woodbridge after charging that they defrauded 8,400 retail investors, many of whom were seniors investing their retirement funds.
Woodbridge advertised its primary business as issuing short-term loans with 11-15% interest to commercial property owners, and promising investors up to 10% on their principal. The vast majority of the borrowers were Shapiro-owned companies that had no income and never made interest payments on the loans, the SEC charged.
Woodbridge paid some investors with other investors’ money, while allocating $64.5 million in commissions to sales agents who pitched the investments as “low risk” and “conservative,” the regulator said.
Judge Marcia G Cooke of the U.S. District Court for the Southern District of Florida approved judgments ordering Shapiro to pay a $100 million civil penalty and to disgorge $20.6 million in ill-gotten gains and interest. Woodbridge and its 281 related companies were ordered to pay $892 million in disgorgement.
Woodbridge has filed for Chapter 11 bankruptcy protection, but the SEC said in a statement that a liquidation trust is being established to distribute net proceeds from disposition of the defendants’ assets. It acknowledge that the distribution amounts depend on how much the trust can collect.
“The settlement provides for the return of significant funds to investors,” SEC Miami regional office director Eric I. Bustillo said in a prepared statement.
Shapiro, Woodbridge’s former owner and chief executive, consented to the entry of an SEC administrative order without admitting or denying the regulator’s findings. He was permanently barred from associating with any entity in the securities industry and from participating in penny stock offerings and his RS Protection Trust and some other defendants were also collectively ordered to pay $5.3 million in ill-gotten gains and interest.