SEC charges alleged operators of $1.2 billion Ponzi scheme

The Securities and Exchange Commission on Thursday charged a California man and his Florida-based group of companies with running a $1.2 billion investment scheme targeting vulnerable clients.

Robert Shapiro allegedly used his Woodbridge Group of Companies to operate a scheme in which he promised customers consistent high returns on investments in small business loans, according to the SEC complaint.

The SEC alleges that Shapiro promised more than 8,400 investors 5 to 10 percent interest annually on money he claimed his company would issue as loans. Shapiro allegedly promised the investors their money would go to loans issued to commercial property owners paying 11 to 15 percent interest rates.

{mosads}But the SEC alleges that Shapiro simply lent the money to other companies he owned, which paid no interest on the loans. He allegedly used the money to pay sales agents roughly $64 million in commissions, reimbursed some investors to keep the scheme going, and diverted $21 million for luxurious purchases.

Shapiro allegedly used the part of the $1.2 billion from defrauded customers, many of which were seniors, to “charter planes, pay country club fees, and buy luxury vehicles and jewelry,” according to the SEC complaint. The scheme allegedly folded in December, when Shapiro stopped paying investors and his companies filed for bankruptcy.

Judge Marcia Cooke of the U.S. District Court for Southern Florida ordered an asset freeze on Shapiro and his companies and demanded they provide a full accounting of their investment activities. The SEC is asking the court to order Shapiro to reimburse the allegedly defrauded investors.