$1 Billion Ponzi Scheme Penalty

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By William Vogeler, Esq. on January 30, 2019 11:30 AM

A federal judge ordered a Florida-based enterprise to pay $1 billion in fines and penalties for operating a Ponzi scheme that defrauded thousands of investors.

Most of the 8,400 victims were elderly people, many who invested their life savings. They were lured by promises of high returns.

The Securities and Exchange Commission filed the charges, saying it was a "business model built on lies." For the operators, however, it was business as usual.

"Built on Lies"

Robert H. Shapiro, former CEO of Woodbridge Group of Companies, said they paid investors 11-15 percent interest for loaning money to third-party commercial property owners. But the SEC said Shapiro owned the "vast majority" of the companies, and they were just shells.

Eric Bustillo, director of the SEC's Miami regional office, said Shapiro hid his ownership under a layer of 281 companies. He said Shapiro used the "scheme to line his pockets with millions of investor dollars."

The scheme fell apart in December 2017, when Woodbridge stopped paying investors and filed for bankruptcy. The SEC promptly froze the assets.

Judge Marica G. Cooke approved judgments against Woodbridge and its related companies. She ordered them to pay $892 million.

Planes, Clubs, and Luxury Vehicles

The judge also ordered Shapiro to pay a $100 million civil penalty and to disgorge $18.5 million in profits, plus $2.1 million in prejudgment interest.

According to reports, Shapiro used the money on chartered planes, country clubs, luxury vehicles, and jewelry. His enterprise also paid sales agents $64.5 million in commissions.

The SEC charged 18 of those agents in the scheme. Officials say they sold unregistered securities.

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