SoCal Developer Charged With Masterminding $1.3B Ponzi Scheme
Luxury residential developer Robert Shapiro, owner of the southern California-based Woodbridge Group of Cos., has been arrested on federal charges of mail and wire fraud.
Shapiro and two other former Woodbridge executives are charged with orchestrating a Ponzi scheme that defrauded about 10,000 investors of about $1.3B.
The arrests followed an indictment out of the Southern District of Florida that was unsealed last week.
According to the indictment, Shapiro, Dane Roseman and Ivan Acevedo promoted speculative and fraudulent securities through telephone and in-person conversations, emails and website displays, targeting elderly investors who had individual retirement accounts.
The indictment alleges that the defendants' main business model was to solicit money from investors and, in exchange, issue investors promissory notes reflecting purported loans to Woodbridge that paid monthly interest and matured in 12 to 18 months.
The defendants claimed that the investments were tied to real property owned by third-party property owners, the indictment alleges. The defendants allegedly described the investments as “low risk,” “safe” or “conservative," when they were actually using money from new Woodbridge investors to pay off previous investors.
The indictment also alleges that Shapiro caused most of the Woodbridge companies to file Chapter 11 bankruptcy, which caused investors to suffer substantial losses.
According to the indictment, Shapiro took about $35M in investor money for his own benefit, allegedly spending millions on personal expenditures, such as $3.1M for chartering private planes and other travel, $6.7M on a home for himself, $2.6M on home improvements, $1.8M on personal income taxes, $1.4M to his ex-wife and over $672K on luxury automobiles.
The three defendants had initial appearances before a U.S. magistrate judge in the Central District of California, who ordered Shapiro to be detained. Roseman and Acevedo were ordered to appear in the Southern District of Florida for their arraignment, though an arraignment date hasn't been scheduled yet.
In January, Judge Marcia G. Cooke of the U.S. District Court for the Southern District of Florida ordered Woodbridge Group of Cos. and Shapiro to pay roughly a combined $1B to victims of the Ponzi scheme, with Shapiro's part in the payments totaling about $120M.
In late 2017, the Securities and Exchange Commission had filed an emergency action charging Shapiro and Woodbridge with operating a Ponzi scheme. The SEC's complaint alleged that Shapiro made Ponzi payments to investors and used a web of shell companies to conceal the scheme.
Shapiro consented to the final judgments against him without admitting or denying the SEC's complaint. In the matter of the criminal indictment, Shapiro and the other defendants pleaded not guilty.