Woodbridge Securities, a company founded by Robert H. Shapiro, was shut down by the SEC in 2018 for operating a massive Ponzi scheme.
The scheme involved over $1.2 billion in investments from over 8,000 investors.
Woodbridge Securities promised unusually high returns, often between 8-12% per year, to attract investors.
These returns were often used to pay off earlier investors, rather than being invested in legitimate assets.
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The Ponzi Scheme
Woodbridge Group of Companies LLC allegedly operated a massive $1.2 billion Ponzi scheme that defrauded 8,400 retail investors nationwide.
The scheme targeted retail investors, many of whom were elderly and had invested retirement funds.
Woodbridge and its 281 related companies were reportedly ordered to pay $892 million in disgorgement by the Honorable Judge Marcia G. Cooke of the U.S. District Court for the Southern District of Florida.
The SEC's complaint alleged that Shapiro made Ponzi payments to investors and used various shell companies to hide the scheme.
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The scheme was so massive that it prompted the SEC to file an emergency action in December 2017 charging Woodbridge and other defendants with operating the Ponzi scheme.
Former owner and CEO Robert H. Shapiro was ordered to pay a $100 million civil penalty and to disgorge $18.5 million in ill-gotten gains plus $2.1 million in prejudgment interest.
A Liquidation Trust is reportedly being formed under a plan in the Woodbridge Chapter 11 case in the U.S. District Court for the District of Delaware.
The trust will be obligated to make distributions of net proceeds from the disposition of the defendants' assets in bankruptcy.
The amount to be distributed will depend upon the amounts collected by the Liquidation Trust, according to the SEC.
Regulatory Action
The SEC and FINRA have been actively going after brokerage firms and brokers who sold Woodbridge investments to customers.
In one notable case, FINRA awarded $276K to an investor in an arbitration claim against Quest Capital Strategies for allegedly inadequate supervision of broker Frank Dietrich, who sold unregistered securities to the customer.
Regulators have been cracking down on those involved in the Woodbridge scandal, with FINRA even barring some individuals from the industry.
For example, Frank Dietrich was barred by FINRA, and Woodbridge's former CEO Robert Shapiro was ordered to pay a $100 million civil penalty and to disgorge more than $20 million in ill-gotten gains and interest.
The SEC has also barred four "advisers" for selling unregistered Woodbridge securities: Claude Mosely of South Carolina, Randy Rondberg of Arizona, Marcus Bray of California, and Andrew Costa of Florida.
Randy Rondberg, in particular, sold about $15.5M of unregistered Woodbridge promissory notes and private placement fund offerings, making around $918K in commissions in the process.
Woodbridge and its related companies have already settled with the SEC, consenting to pay over $1B, including $892M in disgorgement of ill-gotten gains.
The total amount of disgorgement ordered by the court is $892 million, with Robert Shapiro also being ordered to pay a $100 million civil penalty.
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