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.

The Securities and Exchange Commission (SEC) recently sought documents form a group of companies known as Woodbridge that has previously been accused of selling unregistered securities by state securities regulators. Woodbridge, based in California, has reportedly raised over $1 billion from investors- allegedly by offering the sale of unregistered securities through unregistered brokers. Woodbridge and its agents have also been sanctioned by multiple state regulators for allegedly offering unregistered securities, including a 2015 cease-and-desist order by Massachusetts, a cease-and-desist order against Woodbridge Fund 3 and principal Robert Shapiro imposed by Texas in 2015, and a 2016 complaint filed by Arizona regulators.

Most recently, Colorado regulators reportedly have opened an investigation into Colorado-based alleged Woodbridge brokers including James Campbell of Campbell Financial Group in Woodland Park, and Timothy McGuire of Highlands Ranch. Woodbridge has reportedly raised $57 million from 450 Colorado investors and continues to solicit investors through online and radio advertising.

Some FINRA-registered stockbrokers and financial advisors have also allegedly sold unregistered Woodbridge securities to clients, including Frank Capuano, who was registered with Royal Alliance Associates in Holyoke, MA. Capuano was alleged to have sold over $1,000,000 of the private notes to Royal Alliance customers and received over $30,000 in commissions.

Despite the regulatory actions, Woodbridge reportedly continues to sell securities. Some of the issuers of Woodbridge securities are 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 PA, LLC

* Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth)

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.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with private placement offerings, including investments in oil and gas drilling funds and hedge funds. Investors may contact our office at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Brokerage firms that sell private placements such as the Woodbridge funds must conduct due diligence on the investment before recommending it to their clients. The due diligence rule stems from FINRA Rule 2310, the so-called suitability rule, which requires that a brokerage firm must have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. This principle is further explained in National Association of Securities Dealers Notice to Members 03-71, which elaborates that a brokerage firm must perform significant due diligence before recommending a private placement investment to any customer(s). By recommending a security to customers, the brokerage firm effectively represents that a reasonable investigation of the merits of the investment has been made.

According to a lawsuit filed by the Securities and Exchange Commission (“SEC”), Woodbridge has raised over $1 billion from thousands of investors through various finds. Some of the Woodbridge investments involve First Position Commercial Mortgages (“FPCMs”), which consists of a promissory note from a Woodbridge Fund, a loan agreement, and a non-exclusive assignment of the Woodbridge Fund’s security interest in the mortgage for the underlying hard-money loan. These FPCMs are securities in the form of notes, investment contracts, and real property investment contracts.

The following Woodbridge investments could give rise to an arbitration claim against a stockbroker or financial advisor 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 3A, LLC

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

If you have invested in any Woodbridge fund or another private placement, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your 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.