The Securities and Exchange Commission has charged a California CEO and his insurance firm with offering and selling unregistered securities and acting as an unregistered broker in connection with a $1.2 billion Ponzi scheme orchestrated by convicted felon Robert Shapiro and the Woodbridge Group of Companies.
The SEC complaint said from May 2016 to November 2017, Steven M. Sexton and Sexton Financial Advisory Group, Inc. (SAG) served as an external sales agent for Woodbridge Group of Companies, and sold approximately $4.6 million of Woodbridge’s securities to about 63 investors, earning $244,654 in commissions and other compensation from Woodbridge.
Neither Sexton nor Sexton Financial Advisory were registered as broker-dealers and they were not qualified for any of the exemptions from the registration requirements, the SEC said.
Sexton and his firm are the latest participants to be charged in the fraud operated by Robert H. Shapiro from 2012 to 2017. Shapiro pleaded guilty to conspiracy and tax evasion and was sentenced to 25 years in prison in October 2019 in relation to the scheme.
The complaint said the offers and sales by Sexton and SAG of Woodbridge securities were part of a larger nationwide offering of securities by Woodbridge and its other internal and external sales agents that raised at least $1.22 billion from more than 8,400 investors, many of whom were elderly, nationwide through fraudulent unregistered securities offerings.
The SEC said up until its bankruptcy and the SEC’s action in December 2017, Woodbridge operated the massive Ponzi scheme, utilizing a nationwide network of external sales agents, including Sexton and SAG, to act as unregistered brokers and sell unregistered securities.
Investors were promised returns as high as 10% from investments in loans to property developers. Instead, Shapiro used money from new investors to repay earlier ones and used $36 million to buy luxury homes, wines, paintings and custom-designed jewelry for his wife, the complaint said.
In March, the SEC charged three other sales agents, David H. Goldman of Chatsworth, Calif., and Brook Church-Koegel and Nicole J. Walker, both of Marina Del Rey, Calif., with selling and assisting others in selling about $444 million in Woodbridge securities in unregistered transactions to thousands of predominantly elderly investors.
The latest complaint, filed in the Central District of California, charges Sexton and Sexton Advisory with violating the securities registration provisions and the broker-dealer registration provision. He also agreed to pay a total of about $271,792 in disgorgement and prejudgment interest, which will be offset by the approximate $251,827 that Sexton Advisory has already paid to the trustee appointed over Woodbridge in a separate case, leaving a balance of approximately $19,965.
Additionally, he will pay a $30,000 civil penalty, for a total payment of approximately $49,965, all of which he will pay to the trustee to be distributed to investors as part of a fair fund, the SEC said.