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Woodbridge Bankruptcy Update:   Judge Approves Settlement Agreement Calling For Board of Managers

House in HandsAs highlighted in our previous 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 Securities and Exchange Commission (“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, and sought appointment of an independent trustee.

On January 23, the SEC announced a resolution under which the Bankruptcy Court for the District of Delaware approved a settlement Term Sheet, calling for the appointment of a new Board of Managers consisting of representatives recommended by the parties which will take necessary actions for managing Woodbridge, with the first course of action to be selecting a CEO or Chief Restructuring Officer for the Debtors. The Term Sheet also calls for the formation and appointment of Unitholders and Noteholders committees to represent the interests of investors who purchased Woodbridge notes and unit investments.

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 for a no-cost, confidential consultation.

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