SEC charges Woodbridge Group with running $1.2 billion Ponzi scheme

Bankrupt real estate developer and its founder, Robert Shapiro, accused of targeting 8,400 investors

Dec 21, 2017 @ 2:08 pm

By Bruce Kelly

The Woodbridge Group of Companies and its founder, Robert Shapiro, were charged on Thursday by the Securities and Exchange Commission with running a massive, $1.2 billion Ponzi scheme that targeted 8,400 investors.

Formerly based in Boca Raton, Fla., Woodbridge ran a real estate scheme based on short-term, one-year loans and mortgages, according to the SEC's complaint.

It advertised its primary business as issuing loans to supposed third-party commercial property owners who paid Woodbridge 11% to 15% annual interest for so-called "hard money," short-term financing.

In return, Woodbridge allegedly promised to pay investors 5% to 10% interest annually, according to the SEC.

A spokeswoman for Woodbridge, Kristin Cole, did not immediately comment when contacted Thursday afternoon.

Woodbridge and Mr. Shapiro allegedly sought to avoid investors cashing out at the end of their terms and boasted in marketing materials that "clients keep coming back to [Woodbridge] because time and experience have proven results. Over 90% national renewal rate," according to the SEC.

The SEC's lawsuit alleges that Mr. Shapiro and Woodbridge used investors' money to pay other investors, the definition of a Ponzi scheme. They paid $64.5 million in commissions to sales agents, according to the complaint, which included a broker the SEC earlier barred from the securities industry, Barry Kornfeld.

The sales agents pitched the investments as "low risk" and "conservative," the SEC claims. Mr. Shapiro, of Sherman Oaks, Calif., allegedly diverted at least $21 million for his own benefit, including to charter planes, pay country club fees and buy luxury vehicles and jewelry.

"We allege that through aggressive tactics, Woodbridge and Shapiro swindled seniors in a business model built on lies," said Stephanie Avakian, co-director of the SEC's enforcement division.

The Woodbridge Group filed for bankruptcy on Dec. 4. Woodbridge investors were not paid their monthly dividends last month, setting off alarm bells. When the company filed for bankruptcy, it blamed rising legal and compliance costs, in part, for its problems.

In August the SEC sent subpoenas to 235 LLCs — limited liability companies — which the Commission believes are owned and/or controlled by Mr. Shapiro, but did not receive a sufficient response, according to an SEC filing from October.

The Commission has been investigating Woodbridge, which is based in Sherman Oaks, for the past year.

"Mr. Shapiro is cooperating with the bankruptcy to protect the assets held for the benefit of Woodbridge's stakeholders," said Ryan O'Quinn, an attorney for Mr. Shapiro. "He denies any allegation of wrongdoing and looks forward to his opportunity to defend himself in a court of law."


What do you think?

View comments

Most watched


Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.


Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

Hopes high for bill to ease small-firm adviser regulations

High-ranking, bipartisan members of the House Financial Services Committee back the legislation.

Redtail CRM data breach exposes personal client data

The information exposed includes names, addresses, dates of birth and Social Security numbers.

This strategy can double your estate-tax exemption

'Portability' allows a surviving spouse to tack the decedent's exemption on to his or her own. Despite the higher threshold for paying estate taxes in the 2017 tax law, experts recommend filing for the benefit.

Couple in Morgan Stanley advisory account wins $519,000 arb case over unsuitable investments

Plaintiff's lawyer says junk bonds, futures contracts and derivatives were inappropriate for his clients.

The growth of factor-based investing

Advisers are making decisions about clients' portfolios by using the same characteristics that govern factor-based ETFs.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print