Investors in Woodbridge Group Ponzi Scheme Receive Fourth Distribution Payment
Woodbridge Liquidation Trust announces 4th distribution payment of 2020
by Greg W. Anderson of ‘Lessons Learned from The Woodbridge Scam’
November 20, 2020 — Investors scammed in the Woodbridge Group Ponzi real estate scheme received their fourth distribution payment of 2020 this week from the trustees handling the firm’s Chapter 11 Bankruptcy and Rehabilitation Trust, Woodbridge Liquidation Trust. This is the sixth distribution overall. This latest payment along with three others made in 2020 represent about 30% of the principal investors lost to date.
Recap: The Woodbridge Ponzi Scheme
The Securities and Exchange Commission (SEC) in 2017 brought charges against Los Angeles-based luxury real estate developer Woodbridge Group of Companies LLC and its former owner and CEO Robert E. Shapiro for operating a $1.2 billion Ponzi scheme that duped numerous seasoned investors, including hedge fund managers and retail investors, many of them seniors. Woodbridge was ordered to pay $892 million, and Shapiro, who was found to have violated antifraud and other security provisions, is serving a jail sentence of 25 years and was ordered to pay a total of $125 million.
Woodbridge and 250 Shapiro-controlled shell companies pulled off the real estate Ponzi scheme from 2012–2017, misleading investors from Florida to California by promising returns between 5%-7% annual interest on luxury spec homes and various ‘fix-and-flip’ projects. The investor money instead was moved into different entities Shapiro controlled, and new investments were used to pay off older ones. He also used $36 million to buy luxury homes, fine wines, paintings, and custom-designed jewelry for his wife. The scheme targeted retirees and retirement account funds with more than 8,400 people affected by the scam. More than 2,000 individuals lost their retirement savings.
After the SEC investigation and charges were filed, Woodbridge went into bankruptcy in December 2017. The Woodbridge Liquidation Trust was subsequently created to assist investors in recovering their losses and provided real estate managers the ability to market and sell the many properties that Shapiro controlled via Woodbridge loans. There is about $400 million worth of real estate yet to sell, which when completed, will enable investors to recoup about 75 cents on the dollar.
Class-Action Suit Against Comerica’s Involvement in Woodbridge Ponzi Scheme
A class-action lawsuit was also filed for $40 million against Comerica Bank, alleging that the financial institution aided and abetted Shapiro and Woodbridge in their Ponzi scheme. The case is ongoing.
Bankruptcy Trustee Suing Attorneys
Moreover, the bankruptcy trustee on behalf of the investors is also suing nine law firms and several attorneys involved who helped create the legal entity behind the Ponzi scheme and craft various real estate-based documents to help further the Woodbridge loan efforts. The claims filed against the attorneys include:
· aiding and abetting securities fraud
· aiding and abetting fraud
· aiding and abetting breach of fiduciary duty
· negligent misrepresentation
· professional negligence
· aiding and abetting conversion
· actual fraudulent transfer
· constructive fraudulent transfer
The Woodbridge Liquidation Trust is seeking $500 million in general damages as well as an unspecified amount in restitution and punitive damages from five different large law firms. Another half dozen cases in the $5 million to $20 million range were also filed against other firms and lawyers.
The cases, however, may never make it before a jury and be settled out of court, as the Woodbridge Group has been officially labeled as a Ponzi scheme by both the SEC and the Delaware bankruptcy judge, with the mastermind Shapiro sitting in jail for fraud.
Leaving the outcome of the litigation up to a jury is extremely risky for the defendants considering these undisputed facts with a path to settlement through the defendants’ Errors & Omission (E&O) insurance possibly the more prudent choice. An E&O policy is designed to protect the assets of a law firm against claims of inaccurate advice, misrepresentation, and negligence.
Keep checking back with us for updates on developments in the Woodbridge Group case. Authored by Greg Anderson, the CEO of Fort Collins-based Balanced Financial Inc.
