Some eye-popping figures came out that Monday federal court ruling in Florida, where the Securities and Exchange Commission announced that Woodbridge Group of Companies LLC and its former owner have been ordered to pay $1 billion in penalties and disgorgement for operating a Ponzi scheme that targeted retail investors, many of them seniors who had invested retirement funds.
The Honorable Judge Marcia G. Cooke of the U.S. District Court for the Southern District of Florida approved judgments against Woodbridge and its 281 related companies (281!) ordering them to pay $892 million in disgorgement, or repayments of ill-gotten gains to the parties that have been defrauded.
The court ordered former owner and CEO Robert H. Shapiro to pay a $100 million civil penalty and to disgorge $18.5 million in ill-gotten gains plus $2.1 million in prejudgment interest.
Shapiro also consented to the entry of an SEC administrative order, without admitting or denying the SEC’s findings, permanently barring him 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.
You may remember back in December 2017, the SEC filed an emergency action charging the company and other defendants with operating a massive $1.2 billion Ponzi scheme that defrauded 8,400 retail investors nationwide.
The SEC’s complaint alleged that Shapiro made Ponzi payments to investors and used a web of shell companies to conceal the scheme.
“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.”
“Our complaint charged that when Woodbridge’s fictitious business model collapsed, the company stopped paying investors and filed for Chapter 11 bankruptcy protection,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The settlement provides for the return of significant funds to investors.”
How much gets distributed to victims will depend on Woodbridge’s Chapter 11 bankruptcy and how much a related liquidation trust collects.
Of course, Bernie Madoff still holds the all-time record for operating the largest Ponzi scheme, pleading guilty in 2009 to 11 federal crimes and sentenced to 150 years in prison with restitution of $170 billion.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.