Woodbridge companies ordered to pay $1 billion for operating massive real estate Ponzi scheme

Mortgage & Real Estate

Well-known luxury real estate developer Robert Shapiro and the group of companies he founded must pay back $1 billion for allegedly swindling thousands of investors out of hundreds of millions of dollars via a massive real estate Ponzi scheme.

Just over a year ago, the Securities and Exchange Commission sued Shapiro, the founder of the Woodbridge group of companies, for allegedly running a Ponzi scheme that defrauded more than 8,400 investors by promising high returns on real estate investments.

And now, a federal judge has ordered Shapiro and the Woodbridge companies to pay back $1 billion for operating the Ponzi scheme.

According to the SEC, Judge Marcia Cooke of the U.S. District Court for the Southern District of Florida approved judgments against Woodbridge and its 281 related companies that order the companies to pay $892 million in disgorgement.

Additionally, Cooke ordered Shapiro to pay a fine of $100 million, plus disgorgement of $18.5 million in ill-gotten gains and $2.1 million in prejudgment interest.

According to the SEC, many of Shapiro’s alleged victims were seniors who invested their retirement savings into the supposed Ponzi scheme.

The SEC contended that Shapiro’s companies received more than $1 billion in investor funds, but only generated approximately $13.7 million in interest income from “truly unaffiliated” third-party borrowers.

The SEC claimed that without true income from the supposed investments, Shapiro allegedly used new investor money to pay the returns owed to earlier investors – the hallmark of a Ponzi scheme.

Beyond paying back old investors with new investors’ money, Shapiro also allegedly used investors’ money so that he and his family could “live in the lap of luxury” and spend “exorbitant amounts of investor money in alarming fashion, on items such as luxury automobiles, jewelry, country club memberships, fine wine, and chartering private planes.”

Shapiro’s alleged scheme collapsed in December 2017 when the companies were unable to repay interest payments to certain investors. Then, fundraising from investors stopped, Shapiro resigned, and most of his companies filed for Chapter 11 bankruptcy.

According to the SEC, the court’s disgorgement order against the companies will be handled by a liquidation trust that was created in the companies’ bankruptcy proceedings.

“The Liquidation Trust will be obligated to make distributions of net proceeds from the disposition of the defendants’ assets in bankruptcy,” the SEC said. “The amount to be distributed will depend upon the amounts collected by the Liquidation Trust.”

According to the SEC, Shapiro consented to the entry of the SEC administrative order but did not admit or deny the SEC’s findings. As part of the order, Shapiro is permanently barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.

“This resolution accomplishes one of the SEC’s core missions to protect retail investors,” said Stephanie Avakian, co-director of the SEC’s Division of Enforcement. “Mr. Shapiro and other defendants will be held accountable and required to pay substantial penalties for their misconduct.”

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