SEC Returns With a Bang – A $1 Billion Judgement

The Commission did not spend a lot of time getting reoriented to being at the office. The first day back on the job the agency completed the resolution of a year old Ponzi scheme case that had raised about $1.2 billion by defrauding 8,400 investors. The filing of the Commission’s complaint in December 2017 ultimately resulted in the Woodbridge Group, a collection of 281 related companies directed defendant Robert Shapiro, tumbled into bankruptcy in Delaware. The suit ended the Ponzi payments. SEC v. Shapiro, Civil Action No. 1: 12-cv-24624 (S.D. Fla.).

The Commission settled with the firm, Mr. Shapiro and ten others, obtaining orders from the Court directing the payment of disgorgement and penalties totaling about $1 billion in a case that focused on the protection of retail investors, a key priority of the agency. The company will pay, for example, $892,173,765. That sum will be deemed satisfied by a Liquidating Trust being formed under a plan in the Woodbridge Chapter 11 case in U.S. District Court in the District of Delaware, No. 17-12560.

Separately, Mr. Shapiro was ordered to pay $18,546,643 in disgorgement along with $2,163,613,369 in prejudgment interest. He also consented to the entry of a permanent injunction, entered by the Court, prohibiting future violations of Securities Act sections 5 and 17(a) and Exchange Act sections 10(b), 15(a) and 20(a). Mr. Shapiro also consented to the entry of an order in an administrative proceeding which will bar him from the securities business and from participating in any penny stock offering. In addition, the Court entered orders against each of the other defendants. Collectively, RS Protection Trust and several relief defendants were ordered to pay about $5.3 million in disgorgement and pre-judgment interest.