The Securities and Exchange Commission on Thursday announced charges and an asset freeze against a group of unregistered funds and their owner who allegedly bilked thousands of retail investors, many of them seniors, in a $1.2 billion Ponzi scheme.
According to the SEC's complaint, unsealed Thursday in federal court in Miami, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC, formerly headquartered in Boca Raton, Florida, defrauded more than 8,400 investors in unregistered Woodbridge funds.
SEC investigators said they filed the freeze to prevent further dissipation of investor assets after obtaining court orders in September and November in subpoena enforcement actions that forced the unregistered companies to open their books.
"We allege that through aggressive tactics, Woodbridge and Shapiro swindled seniors into a business model built on lies, which the SEC's Miami Regional Office staff moved to halt," said Stephanie Avakian, co-director of the SEC's Enforcement Division.
According to the SEC complaint, from July 2012 through Dec. 4, 2017, Shapiro used his web of more than 275 limited liability companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.
Shapiro, the complaint states, "promised investors they would be repaid from the high rates of interest Shapiro's companies were earning on loans the companies were purportedly making to third-party borrowers. However, nearly all the purported third-party borrowers were actually limited liability companies owned and controlled by Shapiro, which had no revenue, no bank accounts, and never paid any interest under the loans."
Despite receiving over $1 billion dollars in investor funds, "Shapiro and his companies only generated approximately $13.7 million in interest income from truly unaffiliated third-party borrowers," the complaint states.
Without real revenue to pay the monies due to investors, Shapiro resorted to fraud, the SEC said, using new investor money to pay the returns owed to existing investors.
