CEO in $1.2bn hard-money lending scam to pay $120 million to SEC

by Ryan Smith04 Nov 2018

The former CEO of an organization linked to a $1.2 billion hard-money lending scam has agreed to pay $120 million to the Securities and Exchange Commission.

Robert Shapiro, former head of the Woodbridge Group of Companies, agreed to pay the penalty to settle allegations that he scammed investors in a Ponzi scheme that drove his company into bankruptcy, according to a Bloomberg report. Shapiro didn’t admit or deny the allegations.

According to the SEC, Shapiro and the Woodbridge Group, a group of unregistered investment companies, scammed more than 8,400 investors who thought they were investing in a hard-money lender. Woodbridge advertised its primary business as issuing hard-money loans to commercial property owners who paid Woodbridge 11%-15% annual interest. In return for their investments, Woodbridge allegedly promised to pay investors 5%-10% annually.

Shapiro allegedly tried to dissuade investors from cashing out at the end of their terms – even boasting in marketing materials that Woodbridge had a more than 90% renewal rate. Woodbridge claimed it used its clients’ investments to make high-interest loans to third parties. However, the SEC alleged that “the vast majority” of those borrowers were other Shapiro-owned companies – paper companies that had no income and never made payments on the loans.

Instead, Shapiro used money from new investors to repay earlier ones. He also allegedly spent at least $21 million to charger planes, pay country club fees and buy luxury items.

Shapiro, his wife Jeri, and various Shapiro-owned companies will be responsible for paying a total of $892 million to the SEC, according to Bloomberg. The fines will go into a fund to compensate the Ponzi scheme’s victims.

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