On August 8, 2017, the State of Michigan Corporations, Securities & Commercial Licensing Bureau (“Bureau”) entered a Cease and Desist Order (“Order”) against Woodbridge Mortgage Investment Fund 4, LLC (“Woodbridge 4” or “Respondent”). Respondent Woodbridge 4 is a Delaware-organized limited liability company formed in or around 2015. Woodbridge 4 is one of several mortgage funds offered by the California-based Woodbridge Group of Companies, LLC (“Woodbridge”), the successor firm to Woodbridge Structured Funding, LLC.
In connection with the Bureau’s Order, State of Michigan securities regulators made the following findings of fact concerning their investigation into Woodbridge 4:
- The Bureau determined that Woodbridge 4 offered and sold “First Position Commercial Mortgages” (“FPCMs” or “Notes”) to investors in Michigan that fell within the definition of a security;
- Approximately 230 investors invested more than $14,000,000 with Respondent and its affiliated companies;
- The Bureau determined that the Notes were not federally covered as securities, nor were they registered, or exempt from registration;
- The investigation yielded evidence that Respondent was marketing the Notes as securities to investors, and further, Respondent recommended the securities as having “higher yields and lower risk” than other investments;
- The Bureau determined that Respondent failed to provide relevant financial information to demonstrate its ability to pay investors returns in accordance with promises as advertised; and
- Finally, the Bureau found that Woodbridge 4 failed to inform investors of various cease and desist orders to which it, or one of its affiliate companies, was subject to from the Commonwealth of Massachusetts, State of Texas, and State of Arizona.
These allegations made by Michigan officials are a matter of public record, and have not been independently verified by the authors of this post.
Pursuant to the Bureau’s findings, it was determined that Woodbridge 4 allegedly violated Sections 301 and 501 of the Michigan Securities Act, MCL 451.2301 and 451.2501. Specifically, Woodbridge 4 allegedly violated Michigan securities laws (MCL 451.2301) when it offered and sold FPCMs as note securities that were not federally covered, registered, or otherwise exempt from registration. Furthermore, Woodbridge 4 allegedly violated Michigan securities laws (MCL 451.2501) when it omitted material information in connection with the offer and sale of securities that it advertised as being “safer” and offering “higher yields and lower risk” than other investments, in addition to allegedly failing to inform investors in Michigan of other cease and desist orders from various jurisdictions, including Massachusetts, Texas, and Arizona.
Woodbridge’s entities or mortgage funds (which are not subject to the Michigan Order) include the following:
- WMF Management, LLC;
- Woodbridge Group of Companies, LLC;
- Woodbridge Mortgage Investment Fund 1, LLC;
- Woodbridge Mortgage Investment Fund 2, LLC;
- Woodbridge Mortgage Investment Fund 3, LLC;
- Woodbridge Mortgage Investment Fund 4, LLC;
- Woodbridge Mortgage Investment Fund PA, LLC;
- Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth)
Among the many risks associated with investing in securities through a private placement is the potential for fraud or related misconduct. As described above, in order for unregistered securities to be sold in compliance with federal and applicable state securities laws, in nearly all instances an exemption to registration must apply. With respect to Woodbridge, it does not appear that the various fund offerings were recommended to investors as exempt securities through a permissible private placement offering.
If you have purchased any of the Woodbridge Notesin a private placement and have suffered losses, you may be able to recover these losses in FINRA arbitration. To find out more about your legal rights and options, 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.