Qidian’s founder and sole principal, Bin Hao (“Hao”), held Qidian out as a “High-Tech Real Estate Investment & Financing company,” and on that premise persuaded at least 67 investors from 17 states to pour approximately $10.3 million into a fraudulent Ponzi scheme. 

From at least January 2017 to as late as 2021, Qidian and Hao offered and sold promissory notes and membership interests in various SPVs to investors, promising high annual return rates of 8% to 25%, to facilitate providing loans to a Miami-based real estate company.  Hao represented to investors that their investments were low risk and carried various guarantees, including a “project completion guarantee,” “principal guaranteed,” and “return guaranteed.” 

Hao reportedly solicited investors through pre-existing relationships within the Chinese-American community of Northern Virginia and Maryland, as well as through word-of-mouth referrals from other investors.  In total, the scheme allegedly raised money from investors across at least 17 states. 

The SEC’s Charges 

On September 28, 2023, the Securities and Exchange Commission (the “SEC”) commenced a civil action against Bin Hao and Qidian in the United States District Court for the Southern District of Florida, alleging that they fraudulently raised approximately $10.3 million through an unregistered securities offering.  The SEC’s complaint alleged that starting in January 2019, the Miami real estate company ceased making nearly all interest payments to Qidian.  Nevertheless, Hao and Qidian allegedly continued to solicit new investors, raising at least $10.3 million while misrepresenting that Qidian was using investor proceeds to invest in real estate ventures to generate “guaranteed” annual investment returns, and failing to disclose the Miami company’s deteriorating financial condition. 

The SEC complaint (accessible below) further alleges that: 

• Qidian and Hao used more than $2.3 million of new investor money to pay prior investors’ interest in a Ponzi-like fashion; 
• Hao misappropriated at least $793,267 of investor funds for his personal expenses, including cash withdrawals, credit card payments on his Chase Bank, American Express, and Citibank accounts, BMW lease payments, and mortgage payments; and 
• Defendants transferred $733,217 to three separate accounts in China, none of which are linked to known investors. 

The complaint charged Hao and Qidian with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder.  The SEC’s investigation was part of the Miami Regional Office’s Fraud Against Minority Groups Initiative.

SEC Obtains Final Judgment 

On March 5, 2026, the U.S. District Court for the Southern District of Florida entered a Final Judgment against Bin Hao.  Without admitting or denying the allegations in the complaint, Hao consented to the judgment, which includes: 

• A permanent injunction barring Hao from future violations of the federal securities laws; 
• An officer-and-director bar prohibiting him from serving as an officer or director of any public company; 
• Disgorgement of $1,526,484 in ill-gotten gains plus prejudgment interest of $475,201; and 
• A civil penalty of $236,451 — for a total payment obligation to the SEC of $2,238,136. 

The Final Judgment also includes a bankruptcy nondischargeability provision.  Under Section 523(a)(19) of the Bankruptcy Code, the amounts owed under the judgment are deemed debts arising from violations of the federal securities laws and cannot be discharged in Hao’s pending bankruptcy proceeding. 

Bankruptcy Proceedings 

Hao filed for bankruptcy protection in April 2022 in the Eastern District of Virginia.  In May 2023, the bankruptcy court denied Hao a discharge, finding that Hao failed to satisfactorily explain the loss of millions of dollars in investor funds.  The court also found that Hao had made material misstatements in his bankruptcy filings by failing to disclose cryptocurrency accounts at Coinbase and Kraken, a PayPal account, a Citizens Bank account, and a 50% ownership interest in a construction company.  In a related adversary proceeding, Hao invoked his Fifth Amendment right against self-incrimination when asked whether investor quarterly payments were being funded by new investor money, and the court drew a negative inference from that refusal. 

Scale of Alleged Losses 

In total, Qidian allegedly provided at least $26 million in funding to the Miami-based real estate company for various projects.  Hao’s own bankruptcy schedules reflect potential investor claims exceeding $41 million.  Separately, Metronomics Holdings, LLC — the primary real estate developer — listed a debt to Qidian of over $51 million in its own bankruptcy filings in the Southern District of Florida, suggesting the true scope of investor losses may be significantly larger.

Contact Us 

Investors who wish to discuss a possible claim involving Qidian, Bin Hao, or other persons, including any sales agents who may have solicited an investment, may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.  The firm has handled numerous cases involving securities and commodities, both in state and federal court and in arbitration.  Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide.

Hedgehog advertises itself on its website and elsewhere as a private lending and investment firm, offering investors fixed returns between 12% and 20% annually.  Hedgehog represents that it is engaged in a business of lending funds to small businesses or otherwise assisting small businesses in raising capital.

On June 7th, 2025, Hedgehog disclosed on its website that it was under investigation by the Utah Division of Securities (“UDS”).  This announcement followed an Emergency Order to  Cease and Desist (“UDS Order”) issued by UDS on May 23, 2025 that discusses activities by Hedgehog and other persons, which is accessible here. SD-25-006 Order to Cease and Desist – Hedgehog et al. (1) (1)

Included among the various Hedgehog entities that appear to have offered securities to the  public are Hedgehog Holdings I, LLC (“Hedgehog I”) and Hedgehog Holdings II, LLC (“Hedgehog II”), as well as another entity known as Sunnyside Equity Holdings, LLC (“Sunnyside”).

The UDS Order alleges that Hedgehog Investments and Hedgehog I offered and sold investment opportunities in the form of promissory notes or investment contracts (“Hedgehog Notes”) to more than three hundred (300) investors and collected more than $54 million. The UDS Order alleges Hedgehog Notes purportedly pay interest between 12% and 20% for a 12- or 24-month note, depending on the amount invested, and some notes pay as high as 49% for a two-year note.  The UDS Order further alleges that “between the Hedgehog Notes and Sunnyside Notes, Respondents have fraudulently taken at least $84 million from more than 300 investors… .”

The UDS Order alleges that notes “issued by Hedgehog Investments and the Sunnyside Notes are unregistered securities.”  The UDS Order further alleges that Hedgehog I and II purport to rely on Regulation D, Rule 506(b ), a “safe harbor” under Section 4(a)(2) of the 1933 Securities Act, for an exemption from registration. Pursuant to Utah Code Ann. § 61-1-14.5, the burden of proving an exemption from registration is on the person claiming such exemption.  The UDS Order alleges that “Respondents have not provided evidence to show they meet an exemption from registration. Therefore, based upon the record developed through the [UDS’s]investigation, the Notes issued by Hedgehog Investments and the Sunnyside Notes are unregistered securities.”

The UDS Order alleges that Gilbert, Arizona-based Stronghold Wealth Partners, LLC has a “solicitor agreement” with Hedgehog Investments to refer investors, for which Stronghold Wealth receives transaction-based compensation of 3.5% of the investment principal after a referred individual invests.

While the State of Utah’s investigation does not prove that there has been any wrongdoing by Hedgehog or its affiliates or sales agents, several facts in the UDS Order are concerning including the UDS’s allegations that the subject notes constitute unregistered securities and that some of the investor funds do not appear to have been used in the manner represented to investors.  The subject notes were purportedly private placements offered under an exemption from registration often referred to as Securities and Exchange Commission “Regulation D”.

Investors who wish to discuss a possible claim involving Hedgehog or other persons, including any  sales agents who may have solicited an investment, may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. The firm has handled numerous cases involving securities and commodities, both in state and federal court and in arbitration. Attorneys at the firm are admitted in New York, Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states when required by applicable rules).

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The SEC Complaint is accessible here. SEC Complaint

According to the SEC. MMG and Masanotti allegedly used investor money to make Ponzi-like payments to investors and also used some investor funds for Masanotti’s “extravagant personal expenses.”

According to the SEC, Masanotti told investors that MMG would invest their money in foreign currencies, securities and initial public offerings, but in fact MMG appears to have made no investments on their behalf. After receiving their initial payments, Masanotti continued to deceive investors to perpetuate the investment scheme, including via payments that purported to be returns on capital invested, the SEC said.

Over the course of the scheme, Masanotti allegedly used more than $3 million of Middlesex’s assets for his and his family’s personal benefit, according to the SEC suit. The SEC accuses Masanotti of violating the Securities Act and the Exchange Act.

A Ponzi scheme is a purported investment vehicle in which early investors in the scheme are paid funds from later investors, thus creating the illusion of legitimacy and solvency. Ponzi schemes are often doomed to failure once the perpetrator of the scheme can no longer pay out investors through newly raised money. Some warning signs that every investor should remain mindful of when vetting a potential investment and conducting due diligence include the promise of high returns with guarantees of little or no risk; overly consistent returns with little or no volatility in the investment; marketing through friends and family or through an affinity group such as a church, workplace or community organization; unregistered investments; and am unlicensed seller or promoter. While legitimate broker-dealers and investment advisors sometimes sell investments that turn out to be Ponzis, wittingly or unwittingly, frequently unlicensed sales agents are involved.

Investors with questions about claims about non-conventional investments or concerns that they may have invested in a fraudulent scheme may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, 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).

“Investors trusted Woods and the Southport investment advisers working at his direction, and they stand to lose significant portions of their retirement savings when the Ponzi scheme inevitably collapses. The longer the scheme continues, the larger the losses will be for those left holding the bag,” the SEC Complaint states.

According to the SEC Complaint, advisers soliciting investments in Horizon PE allegedly told clients that they would receive returns of 6% to 7% interest, guaranteed for two to three years, and that their money would be used for nonspecific investments such as government bonds, stocks, or small real estate projects. According to the SEC Complaint, clients were not told that their money would be used to pay returns to earlier investors. The SEC also alleges that investors were told they could receive their principal investment back without penalty subject to a 30-day or 90-day waiting period. The SEC alleges that because Horizon did not follow any traditional record-keeping practices, millions of dollars’ worth of investor funds are currently unaccounted for.

In August 2021, U.S. District Judge Steven D. Grimberg reportedly allowed the appointment of a receiver for, and order a freeze of the assets of, Horizon PE, stating: “The SEC has met its burden with respect to Horizon and [promoter John J.] Woods, that there is a reasonable likelihood those defendants have engaged or are about to engage in violations of the securities laws.”

This law firm has not independently verified any of the foregoing allegations, and is relying on the SEC’s allegations in publicly filed court documents alleging that Horizon PE operated as a Ponzi scheme. A Ponzi scheme refers to purported investments in which early investors in the scheme are paid funds from later investors, thus creating the illusion of legitimacy and solvency. Ponzi schemes have historically failed once the promoter of the scheme can no longer pay out investors through newly raised money.

Ponzi schemes get their name from Charles Ponzi, a charismatic Italian immigrant and polished salesman who duped numerous investors into parting with millions of dollars in exchange for the opportunity to supposedly purchase overseas postal reply coupons at a discount, to then be sold in the U.S. at a significant profit. Unbeknownst to investors, who were promised an enormous 50% return on their investment, Ponzi was not putting investment funds to the use he had represented, but instead was paying handsome “returns” to early investors from the proceeds of later investments.

Investors in Horizon PE who may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email 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). The Gray firm has substantial experience representing investors in claims arising from alleged Ponzi schemes and alleged investments frauds, including representing approximately 300 clients in litigation under the Commodity Exchange Act arising out of a Futures Commission Merchant’s aiding and abetting of convicted Ponzi schemer George Hudgins. See Carey, et al. v. Hudgins, et al., U.S. District Court for the Eastern District of Texas Docket No. 6:08-cv-344. The firm also served as court-appointed co-lead counsel in a case in which plaintiffs recovered $5,100,000 from a law firm accused of violating North Dakota securities law in connection with an unregistered securities offering that turned out to be a fraudulent scheme. See Aleem, et al., v. Pearce & Durick, No. 1:15-cv-00085 (U.S. District Court for the District of North Dakota)

According to the indictment, accessible here u.s._v._james_booth_indictment, Booth, 74, solicited money from over 40 clients of his wealth management business known as Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts. The indictment alleges that, rather than investing the funds as represented, Booth instead misappropriated nearly $5 million to pay his own personal and business expenses. According to the indictment, from 2013 through 2019, Booth purportedly directed some of his clients to write checks or wire money to an entity named “Insurance Trends, Inc.” Booth then allegedly used the funds to pay personal and business expenses.

Under the federal indictment, Booth, of Norwalk, Connecticut, is charged with one count of wire fraud, which carries a maximum sentence of 20 years in prison, one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of investment adviser fraud, which carries a maximum sentence of five years in prison, according to the Department of Justice press announcement.

According to his FINRA broker report, Booth was a registered representative with LPL Financial in Norwalk, CT from February 2018 until June 2019 he was reportedly dismissed after he “admitted to course of conduct beginning while associated with previous member firm involving the misappropriation of client funds for his personal and business use.” Prior to his registration with LPL, Booth was reportedly affiliated with the now-defunct brokerage firm Invest Financial Corp. in Norwalk, Connecticut for thirteen years.

In May 2019, FINRA reportedly began an investigation after receiving information from LPL following an internal investigation of Booth. FINRA later barred Booth from working in the securities industry. Specifically, the FINRA sanction stated that James Booth “consented to the sanction and to the entry of findings that he converted funds, totaling at least approximately $1,000,000 that multiple customers of his gave him to invest on their behalf, he however deposited the funds into an account he controlled and, used them for his own personal use.”

NASD Rule 3010 and FINRA Rule 3110 also require brokerage firms to have a system in place to supervise the sales activities of their Registered Representatives. These industry rules require that each member ensure that transactions with customers are reviewed and in certain instances approved by a Supervisor/Principal of the member. Brokerage firms may be held liable by customers for failures to supervise that result in customer losses due to broker misconduct.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with claims against brokerage firms and investment advisors, including fraud cases and matters involving 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, 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).

Robert Shapiro, the former chief executive officer of Woodbridge Group of Companies, has reportedly agreed to pay $120 million to the Securities and Exchange Commission to settle allegations he defrauded investors in an alleged $1.2 billion Ponzi scheme. Shapiro and his subordinates reportedly promised investors returns of as high as 10% from purported “hard money” loans to third parties. In reality, most of the “loans” were in fact extended to shell companies controlled by Shapiro that had no cash flows to repay the loans, and investors’ funds were instead commingled and used for other purposes.

Woodbridge, which is the subject on ongoing proceedings in Delaware bankruptcy court, received approval on October 29, 2018 for its plan of liquidation. Investors in Woodbridge securities reportedly will receive a refund of between 40-70% of their sums invested, depending on the type of investment and other factors.

Investors who have lost money in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds may be able to pursue recovery of their losses through securities litigation or arbitration. Although so-called First Position Commercial Mortgages (“FPCMs”) and Woodbridge units are securities according to state and federal regulators, Woodbridge FPCMs were not registered as securities with government regulators as required by law, and in many instances were sold by unregistered, unlicensed persons.

In other instances, stockbrokers and financial advisors who were licensed and associated with Financial Industry Regulatory Authority (FINRA)-registered firms sold Woodbridge securities to investors, notwithstanding the fact that the Woodbridge securities were not registered.

A registered person who sells a security away from his or her firm without first obtaining written approval from the firm violates FINRA Rule 3270, and a registered person who engages in an outside business activity without prior notice to his or her firm, including the sale of non-securities products, violates FINRA Rule 3280. Associated persons are required to report, in writing, any and all types of business that they plan to conduct away from their brokerage firms, whether or not it involves a security, and to obtain written approval from their firms before they sell any security, including securities in the form of promissory notes.

In such cases, brokerage firms have typically taken the position that Woodbridge securities were sold without their knowledge or authority in what is typically referred to as a “selling away” scenario. However, denying knowledge of a broker’s activity (or the fact that the activity may be unauthorized) does not absolve a brokerage firm from its obligation to supervise all activities of its associated persons. Financial Industry Regulatory Authority rules including FINRA Rule 3110 have established that firms must properly supervise brokers’ activities while they are registered with the firm. If they fail to do so, the brokerage firms can be held responsible for the activities of their representatives and, thus, could be ordered to compensate their clients for losses sustained for the period they were registered with the firm.

The following Woodbridge investments could give rise to an arbitration claim against a stockbroker or financial advisor (or their employer/brokerage firm) if the recommendation to purchase them lacked a reasonable basis, or if the investments were sold based on misrepresentations or omissions of material fact:

* 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 PA, LLC

* Woodbridge Group of Companies, LLC (DBA Woodbridge Wealth)

Investors in any Woodbridge fund who have suffered losses and purchased Woodbridge securities may be able to recover their losses in FINRA arbitration. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email 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).

According to the SEC, investors were allegedly defrauded in several ways. For example, the Defendants’ purportedly failed to disclose sizable up-front fees of 15-30% taken off the top of investor equity. In addition, the Defendants allegedly misrepresented the returns earned on various real estate deals, touting their “impressive returns” when, in actuality according to the SEC, investors sustained heavy losses on investments in predominantly South Side Chicago real estate deals. The SEC has further alleged that rather than inform investors of financial distress, father and son Defendants Jerome and Shaun Cohen, respectively, elected instead to continue “[t]o solicit investors with offers of safe investments and outsized returns.”

Equitybuild is structured as a Florida corporation. Since at least 2010, the company has solicited investments, promising returns that were to be generated through the purchase, renovation and development of Chicago real estate. Equitybuild Finance, f/k/a Hard Money Company, LLC, is structured as a Delaware limited liability company. Both companies were founded by Defendant Jerome Cohen, 63 years of age, and currently a resident of Naples, Florida. Defendant Shaun Cohen is a resident of New York, New York, and serves as the President and sole officer of Equitybuild Finance.

As noted in the SEC’s Complaint, none of the securities offered by Defendants were registered with the SEC. As we have discussed in prior blog posts, whenever investors are solicited to invest in an unregistered securities offering, commonly known as a private placement, they should proceed with the utmost caution. Typically, private placement deals are very complex, and furthermore, only provide investors with limited information and transparency, often marketed via a Private Placement Memorandum (“PPM”) or similar disclosure documents.

As alleged in the SEC’s Complaint, Defendants “utilized a variety of promotional methods to solicit investments in the Notes.” These Notes, sometimes referred to as Private Mortgage Notes, were offered to investors with interest rates ranging from 12-20%, with terms ranging from 6 mos. – 24 mos. According to the SEC, Defendant Shaun Cohen managed a network of salespeople who reported directly to him and who were instructed “[t]o bring in at least $50,000 in new investments each day.”

Investors who were solicited to invest in Equitybuild Private Mortgage Notes through a stockbroker or financial advisor may have viable FINRA arbitration claims or litigation options, in the event that the brokerage firm or Registered Investment Advisory (“RIA”) firm did not perform adequate due diligence before recommending the investment, or alternatively, in the event that the brokerage firm or RIA failed to properly supervise its financial advisor in connection with his or her recommendations to invest in Equitybuild securities.

Investors who wish to discuss a possible claim 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.

Jerome and Shaun Cohen, father and son, run EquityBuild and a subsidiary, EquityBuild Finance. EquityBuild allegedly has raised at least $135 million from more than 900 investors since 2010, according to the SEC suit, filed in federal court in Chicago. EquityBuild allegedly solicited investors to invest in debt used to finance properties. EquityBuild allegedly touted outsize returns of 12 to 20 percent with minimal risk of loss of principal. and downplayed the risks, according to the SEC complaint. The SEC alleges that EquityBuild, based in Marco Island, Florida, skimmed 15 to 30 percent off each investment through fees that the company and the Cohens didn’t disclose. EquityBuild also allegedly paid returns to older investors with the proceeds of newer investments, paying investors about $14.5 million in interest payments between January 2015 through February 2017 although income and fees from EquityBuild properties totaled only $3.8 million, according to the SEC suit.

It is unclear from publicly available information whether EquityBuild investments were sold by FINRA or SEC-registered financial advisors. Investors in EquityBuild may wish to consider claims against professionals such as stockbrokers, financial advisors, or insurance agents who sold them the investments, or any professional services firms (law firms, accounting firms, etc.) that may have materially participated in EquityBuild’s unregistered securities offering. As the SEC has alleged that the EquityBuild investments were securities that were not registered or exempt from registration, investors may be able to pursue claims against various third-parties that materially participated in these transactions.

EquityBuild investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On July 27, 2018, two affiliated small business lenders — 1 Global Capital (a/k/a 1^st Global Capital, and 1 West Capital (collectively, “1GC”) — filed for Chapter 11 protection in Bankruptcy Court in the Southern District of Florida. Based in Hallandale Beach, FL, the two affiliated lenders are under the same common ownership and are in the business of purportedly providing small business loans known as “direct merchant cash advances,” to various clientele. In connection with the bankruptcy filing, 1GC’s two primary executives, Messrs. Carl Ruderman and Steven A. Schwartz, relinquished their control over the company and tendered their resignations.

As reported, 1GC had around 1,000 individual unsecured creditors prior to filing for bankruptcy. These creditors had loaned 1GC money with the understanding that these funds would then be invested in direct merchant cash advances. Creditors received monthly statements which demonstrated how their investments had supposedly been allocated, in addition to being provided with an online portal to track their investments.

In total, 1GC has reported more than $283 million in unsecured lender claims. Of the 20 largest creditors, all of them are individuals or retirement accounts. Prior to the bankruptcy filing, the SEC had opened an investigation into whether 1GC was engaging in “[p]ossible securities laws violations, including the alleged offer and sale of unregistered securities by unregistered brokers, and by the alleged commission of fraud in connection with the offer, purchase and sale of securities.” At this stage, both the SEC and the U.S. Attorney’s Office for the Southern District of Florida, which recently commenced a parallel criminal investigation, are investigating allegations of possible wrongdoing or malfeasance at 1GC.

In light of these allegations and 1GC’s recent bankruptcy filing, some recent commentary has drawn a comparison to the events surrounding the Woodbridge Group of Companies’ bankruptcy filing and the SEC’s December 2017 charges against Woodbridge, alleging that the firm’s founder and former CEO, Robert Shapiro, had orchestrated a $1.2 billion Ponzi Scheme. While the investigation into 1^st Global Capital continues, investors are encouraged to actively monitor the situation as it unfolds.

Creditors who invested in any 1^st Global Capital direct merchant cash advances upon the recommendation of a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm or Registered Investment Advisor (“RIA”) did not perform adequate due diligence before recommending the investment.

As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors, particularly on esoteric and more opaque investments that are not registered with the SEC, and as such, are typically offered via private placement. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and additionally 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.

Investors who wish to discuss a possible claim 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.

The Securities and Exchange Commission (“SEC”) has filed a fraud lawsuit in federal court in Colorado against a group of companies known as “Financial Visions” and their principal, Daniel B. Rudden (“Rudden”), who allegedly bilked at least 150 investors in a $55 million alleged Ponzi scheme.

The SEC’s complaint charges that Rudden, operating under the name Financial Visions and through a group of companies, issued promissory notes to fund a line of business involving providing financing for funeral services and related expenses to consumers. The SEC alleges that Rudden/Financial Vision defrauded as many as 150 investors after promising them annual returns of 12% or more. Since 2010 or 2011, Rudden allegedly used new investor funds to pay interest and redemptions to existing investors and concealed the Financial Visions companies’ true financial performance and condition.

The SEC Complaint is accessible here.

The SEC charges that through July 2018, the Financial Visions Companies raised as much as $55 million from investors in multiple states through a promissory note offering. Financial Visions allegedly offered annual interest rates of 12% on promissory notes by earning profits through “life insurance assignments.” These “assignments” allegedly amounted to agreeing that a deceased person’s family members could pay for immediate funeral expenses at a later date by assigning life insurance proceeds to pay for these costs. According to the SEC, Financial Visions would then be reimbursed for the costs advanced, plus a 5% fee, upon receipt of the life insurance policy proceeds.

Rudden allegedly held this business out to investors as highly profitable, even though Financial Visions was not in fact earning sufficient income from its life insurance assignment business to pay interest and redemptions to its investors. Rudden allegedly began using new investor funds to pay interest and redemptions to existing investors- one mark of a Ponzi scheme- in 2010 or 2011.

Investors in non-conventional investments such as promissory notes and private placements should remain on alert for possible signs of fraud. In cases of Ponzi-type schemes, these may include:

• The promise of high returns with guarantees of little or no risk;
• Overly consistent returns with little or no volatility in the investment;
• Marketing through friends and family or through an affinity group such as a church, workplace or community organization;
• Overly complex or indecipherable investment strategies;
• Unregistered investments;
• Unlicensed seller or promoter;
• Suspicious investment documentation with errors;
• Failing to receive a scheduled payment;
• Encountering difficulty in exiting an investment and receiving cash.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors who have fallen victim to perpetrators of financial frauds, including Ponzi schemes. Investors may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

On June 19, 2018, the Securities and Exchange Commission (“SEC”) filed a Complaint against various individuals and entities — including former financial advisor John Charles Piccarreto, Jr. (CRD# 6276418) of San Antonio, TX — in furtherance of the SEC’s efforts to “stop an ongoing fraudulent scheme in which the Defendants have raised more than $102 million from at least 637 investors across the United States since 2011.” As alleged by the SEC, Defendants Perry Santillo and Christopher Parris of Rochester, NY purportedly orchestrated a fraudulent Ponzi-like scheme predicated upon first buying or taking over books of business from retiring investment professionals from around the country.

According to the Complaint, after acquiring new investors and assets, Messrs. Santillo and Parris (each formerly registered with FINRA) would coordinate their sales efforts with Defendants, including John Piccarreto, Jr., in order to allegedly persuade victims into withdrawing savings from traditional investments, in order to transfer the capital into issuers controlled by Messrs. Santillo, Parris, or certain of their associates. The SEC has alleged that the Defendants would “falsely claim that their investors’ money [would] be used to operate businesses in fields such as financial services, insurance, real estate development, and medical laboratories.” In actuality, however, the SEC has alleged that Defendants would transfer funds received into “multiple accounts held in the names of different entities” controlled by Defendants. While some of the funds were purportedly used to repay investors in typical Ponzi-fashion, the SEC has alleged that the bulk of the monies were misappropriated by the Defendants.

With regard to Mr. Piccarreto, the SEC has alleged that, in one instance, he met with an elderly investor from Austin, TX in February 2015. As alleged, Mr. Piccarreto convinced the 80 year old investor, who suffered from dementia, into putting $250,000 into an entity controlled by Defendants: Percipience. Mr. Piccarreto later emailed the investor’s daughter, in response to her concerns with the Percipience investment, that “I know this is scary for you and you are just looking out for dad but I promise you I will not let anything happen to any of the money.” In total, the SEC has alleged that Mr. Piccarreto misappropriated approximately $1.3 million in investor money.

According to FINRA BrokerCheck, former financial advisor John Piccarreto, Jr. was previously affiliated with First American Securities, Inc. (CRD# 35841) from June 2014 – July 2015. In July 2017, he voluntarily consented to a two-year suspension from the securities industry, as well as a deferred fine of $15,000, pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) accepted by FINRA Enforcement on June 20, 2017. As determined by FINRA Enforcement, Mr. Piccarreto allegedly “participated in at least 20 private securities transactions, including some transactions by elderly customers, by way of unregistered, private” offerings without providing written notice to his employer, First American Securities.

Brokerage firms including First American Securities have an affirmative obligation to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to adhering to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

Attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including cases involving Ponzi schemes and related misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Investors in Woodbridge Units or Notes, as further defined below, who purchased a Woodbridge investment based upon a recommendation by former financial advisor Alan Harold New (CRD# 2892508) may be able to recover losses through securities arbitration. Publicly available information through FINRA BrokerCheck indicates that Alan New was formerly affiliated with broker-dealer NYLife Securities LLC (“NYLife”) (CRD# 5167) in their Fort Wayne, IN office, from June 2004 – August 2016.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) and certain of its affiliated entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) on December 4, 2017. Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, unlicensed advisors, as well as various licensed financial advisors, including Mr. New. Woodbridge investments essentially came in two forms: (1) so-called “Units” that consisted of subscriptions agreements for the purchase of an equity interest in one of Woodbridge’s Delaware limited liability companies, and (2) “Notes” or what have commonly been referred to as “First Position Commercial Mortgages” or “FPCMs” that consisted of lending agreements underlying purported hard money loans on real estate deals.

As alleged by the SEC, Woodbridge and its owner and former CEO, Mr. Robert Shapiro, purportedly “used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.” According to Steven Peiken, Co-Director of the SEC’s Enforcement Division, the Woodbridge “[b]usiness model was a sham. The only way that Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.”

As indicated through FINRA BrokerCheck, Alan New currently has five (5) pending customer disputes. Each of these disputes center on similar allegations concerning Mr. New’s alleged involvement in recommending “[u]nregistered and fraudulent investments in Woodbridge Mortgage Investment Fund.” Brokerage firms including NYLife have an affirmative obligation to ensure that their registered representatives are adequately supervised. Consequently, brokerage firms must take reasonable steps to ensure that their registered representatives follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their brokers, they may be held liable for losses sustained by investors.

Under FINRA Rule 3280, if a financial advisor wishes to consummate a private securities transaction, then he or she must first provide the firm with prior written notice, detailing the contemplated transaction. Such a transaction must first be approved by the firm. Furthermore, in the event that the transaction is not approved by the firm, then the broker cannot participate in the transaction.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including claims concerning sales of risky, illiquid and opaque financial products. Investors may contact a securities arbitration attorney 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.

Syosset, NY-based stockbroker Matthew Eckstein was recently charged with three counts of second-degree grand larceny, third degree grand larceny, and two counts of first-degree scheme to defraud by the Nassau County District Attorney. These charges stem from Mr. Eckstein’s business as a financial advisor in Garden City, NY, and more specifically, allegations that he “betrayed his clients’ trust when he stole their money in a multi-million dollar Ponzi scheme and even pilfered hundred of thousands from the estates of deceased clients” according to Madeline Singas, the Nassau County District Attorney.

FINRA BrokerCheck indicates that Matthew Evan Eckstein’s (CRD# 2997245) career in the securities industry dates back to 1998, when he first began working as a registered representative for Gould, Ambroson & Associates Ltd. (“Gould”) (CRD# 17412) in Garden City, NY. Since September 16, 2015, Mr. Eckstein has been registered at his own broker-dealer, Sisk Investment Services, Inc. (“Sisk”) (CRD# 19406), where he is chief executive and chief compliance officer. On April 27, 2018, FINRA Enforcement filed a Complaint naming Mr. Eckstein as Respondent. As alleged by FINRA, from December 2014 until December 2015, Mr. Eckstein purportedly sold over $1.3 million in supposedly safe private investments akin to CDs to numerous clients.

Publicly available information suggests Mr. Eckstein’s alleged victims are from Massapequa, Seaford, Smithtown, Melville, Staten Island, Brooklyn, Manhattan, Norwalk, CT, Jupiter, FL, and Redlands, CA. In January 2015, Mr. Eckstein allegedly convinced one customer to invest approximately $385,000 into a company, Conmac Funding (“Conmac”), that was touted as a safe, no-risk investment. Further, Mr. Eckstein purportedly assured the client that the investment principal would be returned in two years, with an additional four-percent interest, much like a certificate of deposit. However, as recently reported, when the client requested his money back two years later, he only received $26,699.

According to FINRA Enforcement, Mr. Eckstein’s alleged misconduct involved an investment scheme run by “KB”, a close friend of Eckstein. FINRA’s Complaint alleges that Mr. Eckstein conducted no due diligence on the issuer of the supposedly safe investments, Conmac: “Eckstein never reviewed the Issuer’s books or financial statements and did not know the sources of the Issuer’s funds, the identity of its customers … the default rate on its loans, its overhead, or the number of its employees.” Further, FINRA Enforcement has alleged that Eckstein misrepresented the nature of these private investments in Conmac as “similar to a CD” and “fully guaranteed.”

Included among the claims brought by FINRA Enforcement are allegations that Mr. Eckstein engaged in “selling away” activity in violation of NASD Rule 3040 and FINRA Rule 2010. Specifically, FINRA has alleged that while registered with Gould, Mr. Eckstein “participated in five securities transactions wherein LM, JS, LS, and BV invested $1.28 million…” Brokerage firms like Gould have a duty to ensure that their registered representatives are adequately supervised, and moreover, must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as internal policies and procedures. In instances where a financial advisor engages in selling away activity, a member firm like Gould may be held liable for losses sustained by investors. Broker-dealers including Gould must ensure that their supervisory system is reasonable and that client accounts are adequately monitored, as brokerage firms may be found vicariously liable for the misconduct or negligence of a registered representative.

Attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including cases involving high-risk, illiquid and opaque private placement investments and selling away cases. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

If you invested in Woodbridge upon the recommendation of former financial advisor Frank Roland Dietrich (“Dietrich”), you may be able to recover your losses in arbitration before the Financial Industry Regulatory Authority (“FINRA”). According to FINRA BrokerCheck, a number of investors have already filed claims against Mr. Dietrich and his former employer, broker-dealer Quest Capital Strategies, Inc. (“Quest Capital”) (CRD# 16783). Publicly available information suggests that Quest Capital has disavowed any prior knowledge of Mr. Dietrich’s alleged business activity conducted away form the firm in selling purportedly non-approved Woodbridge investments. Nevertheless, Mr. Dietrich’s alleged “selling away” activity, to the extent it may have occurred while he was still affiliated with Quest Capital, may give rise to Quest Capital being held vicariously liable for the negligence and/or misconduct of its former employee.

As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, and certain of its affiliated entities, filed for Chapter 11 bankruptcy protection on December 4, 2017 (U.S. Bankruptcy Court for the District of Delaware – Case No. 17-12560-KJC). The SEC has alleged that Woodbridge, through its owner and former CEO, Mr. Robert Shapiro, purportedly utilized “more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

Beginning as early as 2012, Woodbridge and its affiliates offered securities nationwide to numerous retail investors through a network of in-house promoters, as well as various licensed and unlicensed financial advisors. Woodbridge investments came in two primary forms: (1) “Units” that consisted of subscriptions 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.

Brokerage firms like Quest Capital have a duty to ensure that their registered representatives are adequately supervised. Consequently, brokerage firms must take reasonable steps to ensure that their brokers follow all applicable securities rules and regulations, as well as adhere to the firm’s internal policies and procedures. In those instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

In the event that a financial advisor wishes to consummate a private securities transaction, then he or she must first provide the firm with prior written notice, detailing the contemplated transaction. Such a transaction must first be approved by the firm. If such a transaction is not approved by the firm, then the broker cannot participate in the transaction. In instances where a broker fails to notify the firm of the contemplated transaction, in the first instance, or proceeds with an unauthorized transaction in derogation of the firm’s directive to the contrary, then selling away has occurred, in direct violation of FINRA Rule 3280.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes involving broker misconduct, including selling away claims, in addition to claims against brokerage firms for their failure to supervise. Investors may contact a securities arbitration attorney 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.

On May 30, 2018, the Securities and Exchange Commission (“SEC”) filed a civil complaint against Mr. Steven Pagartanis, alleging that the East Setauket, NY stockbroker purportedly “[d]efrauded at least nine retail investors of approximately $8 million by soliciting and selling them securities using false and misleading statements from 2013 to at least February 2018 (the ‘Relevant Period’).” During the Relevant Period, Mr. Pagartanis was affiliated with Cadaret, Grant & Co., Inc. (“Cadaret”) (CRD# 10641) from 2012 – 2017 and, thereafter, with Lombard Securities Incorporated (CRD# 27954) (“Lombard”).

As alleged by the SEC in its Complaint filed in federal court in the Eastern District of New York (SEC v Pagartanis Complaint), Mr. Pagartanis purportedly solicited certain of his customers — many of them retirees who relied upon his advice and investment recommendations — to invest in what was touted as a safe and conservative investment “[w]ith a fixed percentage return, generally between 4.5 and 8 percent annually.” Specifically, the SEC alleged that Mr. Pagartanis informed at least five investors that they were investing in the common stock of Genesis Land Development Co. (“GDC”), a Canadian real estate firm listed on the Toronto Stock Exchange. According to the SEC’s Complaint, in actuality the investment capital raised by Mr. Pagartanis was allegedly funneled to an LLC sharing the name Genesis, for which Pagartanis was the sole member and owner of the LLC.

The SEC has alleged that Mr. Pagartanis conducted a fraudulent scheme, under which he purportedly “[t]ransferred the money raised to his personal bank account, to other entities he controlled, and used around $1.8 million to make monthly interest payments to his customers.” In typical Ponzi-like fashion, the scheme reportedly collapsed in early 2018 when Mr. Pagartanis failed to pay investors their monthly interest payments.

Mr. Pagartanis’ career in the securities industry began in 1989. Since that time, he has been affiliated with numerous broker-dealers as a registered representative. Most recently, Mr. Pagartanis was associated with Cadaret from 2012 – 2017, and thereafter, Lombard. According to publicly available information through FINRA BrokerCheck, Mr. Pagartanis was discharged from his employment with Lombard following an “internal investigation” pursuant to which he purportedly “failed to respond to customer complaint questions and requests for information.”

Brokerage firms Cadaret and Lombard have a duty to ensure that their registered representatives are adequately supervised, a duty which includes monitoring their brokers in connection with outside business activities and/or sales of investments in so-called private placements. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., we have successfully resolved a number of disputes on behalf of investors, including losses sustained due to instances of fraudulent conduct such as Ponzi schemes, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

As we have detailed in numerous blog posts, the Woodbridge Group of Companies, LLC (“Woodbridge”) and certain of its affiliated entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 17-12560-KJC) on December 4, 2017. From the outset of this Chapter 11 proceeding, investors in Woodbridge Notes (“Noteholders”) have taken the position that they hold secured, perfected liens in various real estate deals.

By way of background, beginning as early as July 2012, Woodbridge and its affiliates offered securities nationwide to investors in at least two forms: (1) subscription agreements for the purchase of equity interests or units in one of Woodbridge’s seven Delaware limited liability companies (“Units”); and, (2) lending agreements, some of which were referred to as “First Position Commercial Mortgage Notes,” “mezzanine loans,” “construction loans,” and “Co-Lending Opportunities” (collectively, “FPCMs”).

On March 27, 2018, the Debtors, the Unsecured Creditors Committee and the Ad Hoc Noteholders Committee all agreed on a plan of reorganization that was encapsulated in a Term Sheet filed with the Bankruptcy Court. However, the Term Sheet failed to address whether or not Woodbridge Noteholders who invested in FPCMs do, in fact, hold secured, perfected liens. Accordingly, on March 27^th a Woodbridge FPCM investor – retired 85 year old attorney Lisa La Rochelle – filed an adversary proceeding (the “Owlwood Complaint”) in an effort to resolve the looming question of whether some $800 million in FPCMs should be treated as secured debt for purposes of disposition of the Chapter 11 proceeding.

In opposition to the Debtors and Creditors’ Committees’ stance that Noteholders are unsecured because they neither hold the original promissory note on their collateral, nor do they possess filed UCC-1 financing statements, Ms. La Rochelle has argued that a California statute offers protection to Noteholders. Specifically, the Owlwood Complaint relies upon Section 10233.2 of the California Business and Professional Code, as interpreted by the 9^th Circuit Court of Appeals in In Re: First T.D. Investment, Inc., 253 F.3d 520 (9^th Cir. 2001). Under the holding of In Re FTD, Section 10233.2 is recognized as a consumer protection statute that enumerates certain requirements that will establish perfection, absent holding the underlying note or a filed UCC-1, as is the case with numerous Woodbridge Noteholders.

To begin, the borrower needs to be acting as a broker within the meaning of Section 10131 or 10131.1 of the California Business and Professional Code. Pursuant to 10131.1, the term real estate broker is defined as “a person who engages as a principal in the business of making loans or buying from, selling to, or exchanging with the public, real property sales contracts or promissory notes secured directly or collaterally by liens on real property, or who makes agreements with the public for the collection of payments or for the performance of services in connection with real property sales contracts or promissory notes secured directly or collaterally by liens on real property.”

Second, the statute mandates that the real estate broker has to have “…arranged a loan or sold a promissory note or any interest therein, and thereafter undertakes to service the promissory note on behalf of the lender or purchaser in accordance with Section 10233…” It is worth noting that the Ninth Circuit in In Re FTD used a very broad definition of “sold.” Third, the statute contemplates that the real estate broker undertakes to service the promissory note on behalf of the lender. In the Owlwood Complaint, Ms. La Rochelle has argued that Woodbridge was clearly servicing the note between the respective investment fund and the property company within the meaning of Section 10233. The Secured Noteholders received direct communications and checks from the Woodbridge Group. Further, the Secured Noteholders received monthly interest payments and statements from the Debtors.

Through Ms. La Rochelle’s Motion papers and the supporting Owlwood Complaint, Woodbridge Noteholders seek to terminate the Debtors’ exclusive period and be afforded the right to file their own completing plan of reorganization. As argued by Ms. La Rochelle:

“… this Court should allow the Secured Noteholders to explore filing their own plan. It is clear that certain California properties such as Owlwood hold the greatest value in this case and may provide a basis for significant recovery. To deny California noteholders the right to realize on their specific collateral, which they relied on at the outset when making the investment decision, would be a miscarriage of justice.”

Investors in Woodbridge FPCMs, Units and other securities may be able to recover investment losses through arbitration or 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.

Investors who suffered losses due to misconduct by financial advisor Ralph Savoie (CRD# 411660) may be able to recover their losses in arbitration before the Financial Industry Regulatory Authority (“FINRA”). On March 26, 2018, Mr. Savoie plead guilty in Louisiana federal court to stealing up to $1.5 million from clients, using their monies for personal expenses including jewelry, hotels, and credit card bills, as well as to pay off previous clients in Ponzi-fashion in connection with prior purported investment opportunities. Mr. Savoie allegedly guaranteed his clients high rates of returns on various investments in securities and insurance products, describing the investments as a “sure thing.” In actuality, however, Mr. Savoie allegedly engaged in misconduct by using these funds on personal expenses, to pay prior clients and to funnel money into a “risky real estate venture.”

According to public records, Mr. Savoie of Mandeville, LA, was formerly associated with Cambridge Investment Research Advisors, Inc. (CRD# 134139) (“Cambridge”) in their Metairie, LA, branch office, until on or about August 11, 2015, at which time Mr. Savoie was discharged from his employment with Cambridge as a registered representative. Mr. Savoie’s career in the securities industry is lengthy and dates back to the early 1970’s, including his most recent stint at Cambridge from 2013 until August 2015.

According to publicly available information through FINRA, Mr. Savoie was discharged from his employment with Cambridge due to his alleged failure to “[d]isclose and receive approval for an outside business activity.” Further, FINRA reports that Mr. Savoie has been subject to six customer disputes, including three that remain pending and three that have resulted in settlement. A number of these disputes center on allegations concerning Mr. Savoie’s purported sales of “unsuitable, illiquid, expensive, private placements.”

As our office has discussed in previous blog posts, private placements are, in general, a risky investment proposition. To begin, private placements carry considerable risk (investors should be prepared to lose their entire investment), often are complex in nature, and typically are opaque insofar as investors only have limited information off which to make an ultimate decision as to whether an investment is warranted (as unregistered securities, private placements do not provide the same scope and depth of information as with other investments, such as publicly traded, registered stocks or mutual funds). The majority of private placements are offered pursuant to Regulation D (“Reg D”), an SEC regulation that allows private companies to raise capital without conducting a public offering.

Brokerage firms like Cambridge have a duty to ensure that their registered representatives are adequately supervised, a duty which includes monitoring their brokers in connection with outside business activities and/or sales of private placements. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

The attorneys at Law Office of Christopher J. Gray, P.C. have successfully resolved a number of disputes on behalf of investors, including losses sustained due to instances of fraudulent conduct such as Ponzi schemes, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

As highlighted in our most recent blog posts concerning the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, Woodbridge filed for Chapter 11 bankruptcy on December 4, 2017, in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Thereafter, on December 21^st, the SEC formally filed charges against Woodbridge and its owner and former CEO, Robert Shapiro, alleging that “[D]efendant… used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

By January 2, 2018, the SEC further alleged, among other things, that the timing of the Chapter 11 proceeding called into question whether Mr. Shapiro had preemptively sought bankruptcy protection, in the first instance, in order to shield himself from impending charges of misconduct. Through its Motion to Direct the Appointment of a Chapter 11 Trustee, the SEC alleged that cause existed for the appointment of an independent trustee to help manage the bankruptcy process and protect the interests of numerous Woodbridge investors: “[i]nstead 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 19, 2018, turnaround specialist Mr. Lawrence Perkins of SierraConstellation Partners LLC, resigned as Chief Restructuring Officer of Woodbridge. As recently reported, Mr. Perkins’ resignation will be effective once a replacement is hired, according to attorney Sam Beach of Young, Conaway, Stargatt & Taylor, counsel for Woodbridge. Further, the Bankruptcy Court scheduled closing arguments related to the request for an independent trustee for Tuesday, January 23, 2018.

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.

As we have discussed in previous blog posts, on December 21, 2017, the Securities and Exchange Commission (“SEC”) formally announced charges against the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, as well as Woodbridge’s related unregistered investment funds and the firm’s owner and former CEO, Robert Shapiro. Essentially, the SEC has alleged that “[D]efendant Robert H. Shapiro used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

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.

As we recently discussed in detail in a previous blog post, on December 21, 2017, the Securities and Exchange Commission (“SEC”) formally announced charges, as well as an asset freeze, against the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, as well as Woodbridge’s related unregistered investment funds, and the firm’s owner and former CEO, Robert Shapiro. Among other things, the SEC has alleged in its Complaint – filed in Florida federal court – that “[D]efendant Robert H. Shapiro used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

According to the SEC’s Complaint, Woodbridge utilized a large and coordinated sales force to sell its Woodbridge Notes, sometimes referred to as First Position Commercial Mortgages (“FPCMs”). As further alleged by the SEC, “Woodbridge employed a sales team of approximately 30 in-house employees that operated within Woodbridge’s offices.” Moreover, the SEC’s Complaint alleges that “Woodbridge also utilized a network of hundreds of external sales agents to solicit investments from the general public by way of television, radio, and newspaper advertisements, cold calling campaigns, social media, websites, seminars and in-person presentations.”

As detailed in the SEC’s Complaint, the Woodbridge business model relied upon borrowing money from investors in exchange for promissory notes, typically maturing in 12 – 18 months. These notes carried an annual interest rate of 5 – 8%, payable monthly. The investors’ money was supposed to be issued to lenders in the form of securitized mortgages. However, according to the SEC, this rarely occurred.

As recently reported and covered in several of our prior blog posts, Woodbridge declared Chapter 11 bankruptcy in Delaware in early December. The timing of the filing came on the heels of Woodbridge discontinuing its interest payments to investors. In its bankruptcy filings, Woodbridge cited “increased operating and development costs” that “were exacerbated by the unforeseen costs associated with ongoing litigation and regulatory compliance.”

At this stage, it appears that while Woodbridge was marketed nationwide to a number of investors, South Florida was a particular hotbed of activity. This makes sense, given the large number of retirees and pensioners residing in Florida who seek stable fixed income investments. In fact, as recently reported, one insurance salesman and former broker supposedly sent invitations to potential Woodbridge investors, encouraging potential attendees to “learn how to earn 6% fixed interest” a year, while also highlighting “monthly income checks” and “no market risk.”

It appears that many investors in Woodbridge succumbed to the promise of earning above-market yields on safe, conservative, “risk-free” or “secured” investments in mortgages. Of course, such representations often prove to be a red flag, or indicator of some wrongdoing. When an advisor or promoter makes the claim that an investment product has no risk or is somehow crash proof, it should serve as an immediate warning or red flag to an investor of potential fraud.

Investors who purchased Woodbridge First Position Commercial Mortgages (“FPCMs”) through a stockbroker or financial advisor may have viable 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 adequate due diligence is performed on any investment that is recommended to investors – including private placements under Regulation D. Further, firms and their brokers 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 through investing in a Woodbridge promissory note, from a registered representative of a broker-dealer, you may be able to recover investment losses in FINRA arbitration. 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.