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Woodbridge FPCM Investors May Have Legal Rights

woodbridge mortgage fundsIf you are have invested in Woodbridge Wealth or in any of the Woodbridge Mortgage Funds, you may have questions concerning your rights in light of Woodbridge’s recent bankruptcy filing.

Investors who purchased Woodbridge FPCMs through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm did not perform adequate due diligence before recommending the Woodbridge investment.  Law Office of Christopher J. Gray, P.C. offers a confidential, no-obligation consultation to Woodbridge investors.

Woodbridge Wealth, a California-based firm, sells structured financial products to investors, often through intermediary brokers.   Woodbridge has reportedly raised over $1 billion by selling investors instruments known as First Position Commercial Mortgages (“FPCMs”). The Woodbridge Funds advertise that their management team’s substantial experience lets them maintain a successful lending model and find lending opportunities that are favorable for investors. Investors do not have any role other than providing money. An FPCM 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. The Woodbridge Funds pool money from multiple investors for each hard-money loan. The Woodbridge Funds’ promissory notes effectively guarantee the underlying hard-money loans, and the Woodbridge Funds’ advertising materials state that the Woodbridge Funds are obligated to make payments to FPCM investors even if the hard-money borrower defaults.

However, the viability of Woodbridge’s FPCMs is called into question by Woodbridge’s filing for Chapter 11 bankruptcy protection in Delaware Bankruptcy Court (Case No. 17-12560-KJC).  Woodbridge has asserted that a restructuring of its debt was necessary due to increased operating and development costs, in addition to expenses associated with ongoing litigation and regulatory compliance.   In a development that may be of concern to FPCM investors, Woodbridge argued in its bankruptcy court filings as follows: “While the Debtors believe that the Noteholders’ liens on Third-Party Collateral are not properly perfected and are thus subject to avoidance, out of an abundance of caution, at this stage in the proceedings the Debtors are making available conditional adequate protection to the Noteholders…”  Translated into English, this appears to mean that Woodbridge believes its FPCM holders are unsecured creditors who will not get paid a penny in bankruptcy until after secured creditors have been paid in full.

Woodbridge’s FPCM sales have resulted in certain actions and/or investigations by regulators, including state regulators in Pennsylvania, Michigan, Massachusetts, and Colorado, as well as the U.S. Securities and Exchange Commission (‘SEC”). For example, in May of 2015, Massachusetts state regulators charged an individual with fraud based on the regulators’ allegations that he was marketing and selling unregistered securities to vulnerable elderly investors.   The SEC is also reportedly investigating the Woodbridge Group of Companies for possible violations ongoing violations of Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 15(a) and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, by Woodbridge and other persons and entities.  Specifically, the Commission is reportedly 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.  Please note that these regulatory allegations remain unproven and represent only the factual allegations made by the government regulators.

Some of the Woodbridge entities or Woodbridge Funds 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 PA, LLC
  • Woodbridge Group of Companies, LLC (DBA Woodbridge Wealth)

Investors who purchased Woodbridge FPCMs through a stockbroker or financial advisor may have viable FINRA arbitration claims if the brokerage firm did not perform adequate due diligence before recommending the Woodbridge 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- 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.

Woodbridge investors with questions about their rights may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or for a confidential, no-obligation consultation.

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