U.S. Bankruptcy Judge Kevin J. Carey (D. Delaware Case No. 17-12560-KJC) has overruled the final objection to the Chapter 11 Liquidation Plan (“Plan”) for the Woodbridge Group of Companies, LLC and its affiliated debtors in possession (collectively, “Woodbridge” or the “Debtors”). As we have discussed in recent blog posts, the Woodbridge bankruptcy cases arise out of a purported massive, multi-year fraudulent scheme perpetrated by Woodbridge’s founder and former CEO, Robert Shapiro (“Shapiro”). Judge Carey’s ruling paves the way for payment of creditor claims. Public investors in Woodbridge reportedly will receive around 60-70% of their net investment sums for investments in Notes (or so called First Position Commercial Mortgages or “FPCMs”) and 40-50% of their net investment sums for investments in units in so-called Units.
In connection with the alleged fraud, Mr. Shapiro — through a web of various affiliated entities, including several hundred limited liability companies — raised approximately $1.2 billion from approximately 10,000 investors nationwide. Upon information and belief, many of these investors were elderly retirees who were solicited to invest in either Woodbridge Notes or Units, as further defined below, by a nationwide network of Woodbridge’s own in-house promoters, as well as certain licensed and unlicensed securities brokers.
Woodbridge investments came in two primary forms: (1) “Units” consisting of subscription agreements for the purchase of an equity interest in one of Woodbridge’s seven Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” consisting of lending agreements underlying purported hard money loans on real estate deals.
On December 20, 2017, the Securities and Exchange Commission (“SEC”) initiated an action in Florida federal court against Shapiro and his affiliates, detailing much of the alleged fraud perpetrated by Shapiro prepetition. On December 28, 2017, the Unsecured Creditors’ Committee filed a motion seeking appointment of a Chapter 11 trustee to replace Shapiro’s own handpicked Debtors’ management team. Around this same time, certain groups of Noteholders and a group of Unitholders sought appointment of official committees of Noteholders and Unitholders.
Pursuant to the Plan, a Liquidation Trust will be created, which will be the sole equity holder of a Wind-Down Entity. Further, Woodbridge assets will vest in the Wind-Down Entity, which will be administered by a Wind-Down CEO. A Wind-Down Board will initially consist of Messrs. Richard Nevins, M. Freddie Reiss, and the Wind-Down CEO, Mr. Frederick Chin (or his successor). The Wind-Down CEO will proceed to liquidate the Woodbridge assets, which consist primarily of the real property owned by the Debtors, in an orderly fashion. Subsequently, on a quarterly basis, the Wind-Down Entity will remit cash to the Liquidation Trust.
As alleged during the course of the Chapter 11 proceeding, Shapiro perpetrated a massive Ponzi scheme, using investor money to pay approximately $64.5 million in commissions to brokers and sales agents who sold investments in Woodbridge to unsuspecting retail investors, many of whom sought a “safe” investment that could pay interest of 5-6%. Moreover, it has been alleged that Shapiro misappropriated approximately $21.2 million of investor for his personal benefit and the benefit of his related entities or family members. For instance, it has been alleged that Shapiro charged at least approximately $9 million dollars on credit cards, and purportedly charged personal items using investor monies, including: $200,000 at luxury hotels, $34,000 on limousine services, $1.6 million on home furnishings, $1.4 million on luxury retail purchases, $600,000 on political contributions, and $308,000 on wine.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with alleged securities fraud, including Ponzi schemes. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).