The Feds say they just blew up a $1.2 billion Ponzi scheme aimed at thousands of elderly people in Florida
- The US Securities and Exchange Commission has filed charges against Robert H. Shapiro, alleging that he bilked investors - many of them senior citizens - out of $1.2 billion as part of a Ponzi scheme.
- All remaining assets have been frozen as the SEC pursues its case, which includes charges of fraud and violations of 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 $1.2 billion Ponzi scheme.
Robert H. Shapiro is being accused of using a group of unregistered investment firms, collectively called the Woodbridge Group of Companies LLC, to defraud more than 8,400 investors - many of them senior citizens. Formerly headquartered in Boca Raton, Florida, the company allegedly promised to pay investors interest of 5% to 10% annually.
Woodbridge claimed that its primary business was the issuance of loans to supposed third-party commercial property owners, which they said paid 11% to 15% annual interest. Yet the SEC's complaint alleges that 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, co-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," added Eric I. Bustillo, director of the SEC's Miami regional office. "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, and in turn boasted of a 90% renewal rate in marketing materials. Further, they allegedly paid $64.5 million in commissions to sales agents who pitched the opportunities as "low risk" and "conservative" to potential clients.
The complaint also alleges that Shapiro funneled $21 million to himself, then spent that on chartered planes, country club fees, luxury vehicles, and jewelry.
The SEC is pursuing the case in the wake of the alleged Ponzi scheme's collapse in early December, which came as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection, the complaint said. The commission has also frozen all affiliated assets.
Shapiro, Woodbridge, and certain related companies are being charged with fraud and violations of the securities and broker-dealer registration provisions of federal securities laws. As part of the proceeding, the SEC is pursuing the "return of the allegedly ill-gotten gains with interest and financial penalties."
An initial court hearing has been scheduled for December 29, 2017.