- An alleged Ponzi scheme operator was ordered to pay $US1 billion by a Florida federal court on Monday for defrauding 8,400 investors.
- In December 2017, the SEC charged the company and other defendants with operating a $US1.2 billion scheme that defrauded 8,400 individual investors, many of whom were elderly. The SEC has since charged 18 salespeople, too.
- Former owner Robert Shapiro must pay a $US100 million penalty, return $US18.5 million in profits and $US2.1 million in interest. As part of the settlement, he’s also barred from working with investment advisers and selling penny stocks.
A Florida federal court on Monday ordered an alleged Ponzi scheme operator to pay $US1 billion for defrauding 8,400 investors, many of them senior citizens.
In December 2017, the SEC charged a group of unregistered investment funds called Woodbridge Group of Companies and owner Robert Shapiro with operating a $US1.2 billion Ponzi scheme.
The SEC said the company, formerly headquartered in Boca Raton, Florida, had promised to pay these investors interest of 5-10% annually.
Woodbridge had said its primary business was the issuance of loans to third-party commercial-property owners that paid 11-15% annual interest. But the SEC’s complaint said the “vast majority” of borrowers were companies owned by Shapiro that had no income and never made such interest payments. A web of shell companies concealed the scheme in “a business model built on lies,” the SEC said.
The complaint also said Shapiro funneled $US21 million to himself, then spent that on chartered planes, country-club fees, luxury vehicles, and jewellery.
The Ponzi scheme collapsed in 2017 after Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection, the complaint says. The SEC says it has also frozen all affiliated assets.
“Our complaint charged that when Woodbridge’s fictitious business model collapsed, the company stopped paying investors and filed for Chapter 11 bankruptcy protection,” Eric Bustillo, the director of the SEC’s office in Miami, said in Monday’s statement. “The settlement provides for the return of significant funds to investors.”
Woodbridge and its 281 related companies agreed to pay back $US892 million, while Shapiro is paying a $US100 million penalty and refunding $US18.5 million, plus $US2.1 million in interest. He’s also barred from working with investment advisers, among other groups, and selling penny stocks.
In December, the SEC also charged 10 of Woodbridge’s highest-earning sales agents with unlawfully selling securities, bringing its total count to 18 sales agents charged.