SEC busts $1.2 billion Ponzi scheme

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A Florida-based company was charged in a phony investment scheme by the Securities and Exchange Commission on Thursday.

The SEC charged a California man, Robert Shapiro, and Florida-based Woodbridge Group of Companies in a scheme aimed at targeting vulnerable clients.

According to the SEC complaint, Shapiro and his company ran a scheme in which he promised customers consistently high returns on investments in small business loans.

The $1.2 billion investment scheme promised more than 8,400 investors, many of them senior citizens, five to 10 percent interest annually on money Shapiro said Woodbridge would issue as loans. He allegedly promised that the money investors gave him would go to commercial property loans, with the owners paying 11 to 15 percent interest.

According to the SEC, Shapiro reportedly put the money into other companies he owned and those companies paid zero interest on the money. Among the allegations, Shapiro:

  • used the money to pay sales agents around $64 million in commissions
  • reimbursed certain investors to keep the scheme going
  • diverted $21 million for luxurious purchases, including “charter planes, country club fees, and luxury vehicles and jewelry

The scheme came undone in December, when Shapiro could no longer pay investors. According to Reuters, Woodbridge Group of Companies filed for Chapter 11 bankruptcy on Dec. 4, citing costs of expansion, litigation and a government fraud investigation.

The Hill reports that Judge Marcia Cooke of the U.S. District Court for Southern Florida ordered an asset freeze on Shapiro and his companies. Judge Cooke further demanded they provide a full accounting of their investment activities.

The SEC wants Shapiro to reimburse the alleged defrauded investors.

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