The Securities and Exchange Commission is suing Robert Shapiro, the former head of embattled Woodbridge Group of Companies, for allegedly running a $1 billion Ponzi scheme.
Shapiro, who resigned earlier this month, is accused of misleading investors by making it appear that Woodbridge was financing property acquisitions made by third-party borrowers, the Wall Street Journal reported. Most of the borrowers, however, were shell companies owned by Shapiro, the SEC alleges. Meanwhile, Shapiro and affiliates allegedly paid $64.5 million to “unregistered agents” who sold the Woodbridge securities, and Shapiro spent $21 million on jewelry, luxury cars and chartering planes, the federal agency alleges.
“Mr. Shapiro is cooperating with the bankruptcy to protect the assets held for the benefit of Woodbridge’s stakeholders,” Ryan O’Quinn, a lawyer for Shapiro, told the Wall Street Journal. “He denies any allegation of wrongdoing and looks forward to his opportunity to defend himself in a court of law.”
The Real Deal reported in November that the SEC was investigating Woodbridge and a web of more than 250 shell companies associated with Woodbridge. TRD later uncovered that Shapiro was the quiet force behind the Los Angeles residential brokerage Mercer Vine. Mercer Vine was named as a defendant in the Thursday SEC lawsuit, which called it a “relief defendant” on the grounds that it allegedly made money off the fraud.
Woodbridge, primarily a luxury developer in Southern California and Colorado, made waves in April 2016 when it listed “Skygarden,” a spec home in Bel Air for $100 million. A few months later, Woodbridge, formerly based in Boca Raton, Florida, paid $90 million for the historic Owlwood estate. It relisted the same property months later for $180 million. Neither sold.
Adam Rosenfeld, a founding principal of Mercer Vine, told Mansion Global in 2016 that Woodbridge had purchased about 50 residential properties in the last few years.
Of the thousands of investors who could lose their savings, many are senior citizens who purchased what they thought were secured notes from Woodbridge, the SEC said in filings. [WSJ] — Kathryn Brenzel