Woodbridge Group of Companies and its former owner, Robert Shapiro, was ordered by a federal judge to pay $1 billion in penalties and disgorgement for running a Ponzi scheme targeting retail investors.
Judge Marcia G. Cooke of the U.S. District Court for the Southern District of Florida approved judgments against the Boca Raton, Fla.-based Woodbridge and its 281 related companies, ordering them to pay $892 million in disgorgement. Former owner and CEO 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.
In December 2017, the U.S. Securities and Exchange Commission charged the company and other defendants with operating the $1.2 billion Ponzi scheme that defrauded 8,400 retail investors nationwide, many of them seniors who had invested in retirement funds.
The SEC said Shapiro promised returns of as high as 10 percent from investments in a developer who flipped luxury real estate, but instead their cash flowed into a web of related companies he controlled. Shapiro then used money from new investors to repay earlier ones and spent at least $21 million to charter planes, pay country club fees and buy luxury items, according to the SEC’s filing.
Woodbridge fell into bankruptcy in December amid the SEC probe into the Ponzi scheme allegedly operated by the company, its owner and others. When that happened, the investors solicited by the defendants stopped receiving monthly interest payments.
Stephanie Avakian, co-director of the SEC’s Division of Enforcement, said the settlement accomplishes one of the SEC’s core missions—to protect retail investors. “Mr. Shapiro and other defendants will be held accountable and required to pay substantial penalties for their misconduct,’’ she said.
“The settlement provides for the return of significant funds to the investors,’’ said Eric Bustillo, director of the SEC’s Miami Regional Office.