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.

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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