SEC Sues Real Estate Developer Over Alleged $1.2 Billion Ponzi Scheme
Woodbridge told investors that the commercial loans would generate approximately 5-10 percent interest a year.
Aziz Abdel-Qader
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Regulation
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Institutional FX )
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2017-12-21T20:05:53+00:00
2017-12-21T20:37:45+00:00
The Securities and Exchange Commission (SEC) has charged Florida-based real estate developer Woodbridge Funds, owner Robert Shapiro, and affiliated entities with running a Ponzi scheme that solicited nearly $1.2 billion from approximately 8,400 investors.
The SEC filed its complaint Thursday in a federal court in Miami, naming the unregistered investment companies called the Woodbridge Group of Companies LLC.
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Woodbridge offered a number of structured investment products to the public, which purportedly provided investors with higher returns and shorter terms, secured by commercial real estate. Earlier this month, Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy amidst allegations of misconduct.
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According to the SEC complaint, Robert Shapiro and his companies began soliciting investors several years ago through advertising that their money would be pooled and used in short-term loans offered for embattled property businesses. Woodbridge told investors that the commercial loans would generate approximately 5-10 percent interest a year, as the company would earn 11-15 percent annual interest from offering “hard money” financing.
Woodbridge paid for commercial ads touting investment opportunities in the company and Shapiro met with some investors to show projects they had purportedly funded, also claiming over 90% national renewal rate. In fact, the vast majority of the borrowers were his owned companies that had no income and never made interest payments on the loans, the agency said.
All the while, Shapiro diverted at least $21 million for his own benefit. To create the illusion of stability, the defendants allegedly paid $64.5 million in commissions to sales agents for telling investors that they can make steady gains from Woodbridge’s “low risk and conservative” investments. The defendants also used investors’ money to pay other investors – the hallmark of a Ponzi scheme.
Eric I. Bustillo, Director of the SEC’s Miami Regional Office, commented: “Our complaint further alleges that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers. Shapiro used the scheme to line his pockets with millions of investor dollars.”
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