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Woodbridge Bankruptcy Update: Chief Restructuring Officer Resigns Amid Concerns Related to Need for Independent Trustee Oversight

woodbridge mortgage fundsAs 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 21st, 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.

 

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