Tags: UPDATE 1-U.S. SEC Charges Bankrupt Woodbridge Group over 1.2 Bln Ponzi Scheme

UPDATE 1-U.S. SEC Charges Bankrupt Woodbridge Group over $1.2 Bln Ponzi Scheme

Thursday, 21 December 2017 02:20 PM

(Adds details on SEC charges and Woodbridge bankruptcy filing)

Dec 21 (Reuters) - The U.S. Securities and Exchange Commission has charged Woodbridge Group of Companies and its owner, luxury real estate developer Robert Shapiro, for allegedly operating a $1.2 billion Ponzi scheme that targeted thousands of investors, the agency said on Thursday.

Shapiro, who made headlines last year after buying the Los Angeles Owlwood estate previously owned by stars such as Tony Curtis and Cher for $90 million, resigned as Woodbridge's chief executive officer on Dec. 1, days before the property and investment company filed for Chapter 11 bankruptcy.

According to the SEC's complaint, Shapiro ran a "sham" business model that allegedly defrauded more than 8,400 investors, including many seniors, in unregistered Woodbridge funds by promising them 5 to 10 percent annual interest on money he said would be used for loans to commercial property owners paying 11 to 15 percent interest rates.

The SEC alleged that the vast majority of the borrowers were Shapiro-owned companies that had no income and never made interest payments on the loans.

"The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money," Steven Peikin, co-director of the SEC's Enforcement Division, said in a statement.

The SEC also alleged that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers and "line his pockets with millions of investor dollars."

Shapiro diverted at least $21 million for his own benefit, including to charter planes, pay country club fees, and buy luxury vehicles and jewelry, according to the SEC.

Judge Marcia Cooke of the U.S. District Court for Southern Florida ordered an asset freeze against Shapiro and his companies and ordered them to provide an accounting of all money received from investors, the SEC said.

The SEC started investigating Woodbridge, formerly headquartered in Boca Raton, Florida, in 2016 for possible fraudulent sales of securities. Woodbridge's bankruptcy filing came a month after the SEC issued on Nov. 1 a second subpoena for documents.

Woodbridge aims to use Chapter 11 to restructure some $750 million in debt. It is seeking a $100 million bankruptcy loan backed by the Owlwood property, which it has said in court is back on the market for $180 million. (Reporting by Susan Heavey in Washington and Tracy Rucinski in Chicago; Writing by Tracy Rucinski; Editing by Tim Ahmann and Bernadette Baum)

© 2018 Thomson/Reuters. All rights reserved.

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UPDATE 1-U.S. SEC Charges Bankrupt Woodbridge Group over 1.2 Bln Ponzi Scheme
Thursday, 21 December 2017 02:20 PM
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