Investor Lawyers Blog
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 in Roundstone Healthcare Capital V, L.P. (“Roundstone V” or the “Limited Partnership”) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution if the recommendation to purchase Roundstone V was unsuitable or if a broker or investment advisor who sold Roundstone V made a misleading sales presentation.
Former United Planners Broker Jerry Lou Guttman allegedly sold over $7,000,000 worth of unregistered securities to customers of his former employer. Guttman allegedly sold membership interests in at least six different limited liability companies to 31 customers and seven non-customers without first disclosing the sales to United Planners, according to a recent Letter of Acceptance, Waiver, and Consent (AWC) issued by the Financial Industry Regulatory Authority (FINRA). According to the AWC, Mr. Guttman neither admitted to nor denied the conduct charged by FINRA.
As recently reported, the Woodbridge Group of Companies, LLC (“Woodbridge”) of Sherman Oaks, CA, continue to face considerable regulatory scrutiny in connection with allegations of offering and selling unregistered securities. For the past year on the federal level, the Securities and Exchange Commission (“SEC”) has been conducting an investigation into Woodbridge. In that regard, according to a publicly available court filing, the SEC “[i]s investigating the offer and sale of unregistered securities, the sale of securities by unregistered brokers and the commission of fraud in connection with the offer, purchase and sale of securities” by Woodbridge and its affiliated companies and agents.
If you have sustained losses in an investment in GWG Renewable Secured Debentures, an illiquid and high-risk alternative investment, you be able to recover losses in arbitration before the Financial Industry Regulatory Authority (“FINRA”) if the investment was sold pursuant to a misleading sales presentation or the recommendation to purchase the securities lacked a reasonable basis. GWG Holdings, Inc. (“GWG”) began selling what it termed Renewable Secured Debentures (“Debentures”) in 2012. In certain instances, financial advisors and brokers recommending these Debentures reportedly solicited their clients to invest without first fully disclosing the Debentures’ many risks. In fact, in some instances, financial advisors reportedly made false and misleading oral and written statements concerning these investments offered by GWG, describing them as safe, low-risk, liquid and/or guaranteed. Further, some financial advisors may have recommended these Debentures without taking into account a customer’s specific investment objectives, risk tolerance, as well as other relevant factors which all touch upon the suitability of a specific investment.