- The US Securities and Exchange Commission has filed charges against Robert Shapiro, alleging he bilked investors – many of them senior citizens – out of $US1.2 billion as part of a Ponzi scheme.
- The SEC says it has frozen all remaining assets as it pursues its case, which includes charges of fraud and violating broker-dealer registration provisions.
The US Securities and Exchange Commission has filed charges against a group of unregistered investment funds and their owner, alleging a $US1.2 billion Ponzi scheme.
Robert Shapiro is accused of using the group of firms, called the Woodbridge Group of Companies LLC, to defraud more than 8,400 investors – many of which, the SEC says, are senior citizens.
The SEC says 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 says the “vast majority” of borrowers were companies owned by Shapiro that had no income and never made such interest payments.
“Our complaint alleges that Woodbridge’s business model was a sham,” Steven Peikin, a director of the SEC’s Enforcement Division, said in a release. “The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”
“Our complaint further alleges that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers,” Eric Bustillo, the director of the SEC’s Miami regional office, added. “Shapiro used the scheme to line his pockets with millions of investor dollars.”
Shapiro and Woodbridge are also accused of trying to keep investors from exiting their positions at the end of their terms. Marketing materials for Woodbridge boasted of a 90% renewal rate, the SEC says.
Further, the SEC accuses them of paying $US64.5 million in commissions to sales agents who pitched the opportunities to prospective clients as “low risk” and “conservative.”
The complaint also says Shapiro funneled $US21 million to himself, then spent that on chartered planes, country-club fees, luxury vehicles, and jewellery.
The Ponzi scheme collapsed earlier this month 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.
Shapiro, Woodbridge, and certain related companies are charged with fraud and violating the securities and broker-dealer registration provisions of federal securities laws. The SEC says it’s pursuing the “return of allegedly ill-gotten gains with interest and financial penalties.”
An initial court hearing has been scheduled for December 29.