The SEC’s recent charges come on the heels of Woodbridge filing for Chapter 11 bankruptcy protection on December 4, 2017 in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Through filings with the Bankruptcy Court, the SEC has alleged that Mr. Shapiro sought Chapter 11 protection in order to shield himself from charges of allegedly orchestrating a Ponzi scheme: “[h]e needed to create the appearance of a bankruptcy that resembled a bona fide Chapter 11, complete with legal and restructuring professionals of the type normally seen in a real organization. So instead of allowing a District Court to appoint an independent fiduciary, Robert Shapiro decided that he would select the victims’ fiduciaries when he started hiring the team of managers and professionals who are representing the Debtors’ estates today.”
On January 2, 2018 — in light of these allegations and concerns related to ensuring adequate representation of the numerous Woodbridge investors nationwide — the SEC filed a Motion to Direct the Appointment of a Chapter 11 Trustee. Pursuant to 11 U.S.C. §1104(a), the SEC has sought to appoint an independent Chapter 11 trustee for cause, in order to ensure Woodbridge investors are best protected. In seeking the appointment of a Chapter 11 trustee, the SEC has argued that cause exists, given allegations that “[M]r. Shapiro engaged in widespread fraud, dishonesty, incompetence and gross mismanagement in operating the Debtors prior to bankruptcy. This conduct is sufficient cause for a trustee under Section 1104(a)(1). In re Vaughan, 429 B.R. 14 (Bankr. D. N.M. 2010) (conduct relating to operation of Ponzi scheme falls squarely within Section 1104(a)).”
Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) or a five-year private placement security (“Fund Offerings” or “Units”) through a stockbroker or financial advisor may have viable litigation or FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the Woodbridge investment.
Some of the issuers of Woodbridge securities include the following entities:
- WMF Management, LLC (“WMF”);
- Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth);
- Woodbridge Mortgage Investment Fund 1, LLC;
- Woodbridge Mortgage Investment Fund 2, LLC;
- Woodbridge Mortgage Investment Fund 3, LLC;
- Woodbridge Mortgage Investment Fund 3A, LLC;
- Woodbridge Mortgage Investment Fund 4, LLC;
- Woodbridge Commercial Bridge Loan Fund 1, LLC;
- Woodbridge Commercial Bridge Loan Fund 2, LLC.
As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile. Either an unsuitable recommendation to purchase an investment or a misrepresentation concerning the nature and characteristics of the investment may give rise to a claim against a stockbroker or financial advisor.
If you have invested in any of the Woodbridge Funds, or otherwise purchased a First Position Commercial Mortgage or Woodbridge Fund Offering or Unit, you may be able to recover investment losses in FINRA arbitration, or in some instances, litigation. Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.