A federal court had ordered Woodbridge Group of Companies to pay $1 billion in penalties and disgorgement for operating a Ponzi scheme. The firm was charged to court a year ago by the SEC for conducting a Ponzi scheme.
A release by the U.S. Securities and Exchange Commission on Monday stated that the agency had won the case of a charge of Ponzi scheme against Woodbridge Group of Companies. The judgment of the case which was charged to court over a year ago will see the Woodbridge pay about $1 billion in penalties and disgorgement.
A penalty is a payment made to the government by an accused while a disgorgement is a payment ordered by the court to repay for ill-gotten benefits that the accused had accrued from its victims.
The U.S. District Court Judge, Marcia G. Cooke in the judgement ordered Woodbridge Group of Companies LLC and its 281 associated companies to pay $892 million in disgorgement to retail investors that were defrauded. Also, the former owner and CEO, of the firm, Robert H. Shapiro was ordered to pay $18.5 million plus interest in ill-gotten gains and also a further payment of a civil penalty of $100 million.
The Charges Leveled By SEC
Woodbridge Group of Companies LLC was charged to court in December 2017 for operating a Ponzi scheme in the tune of $1.2 billion to defraud about 8,400 retail investors who are seniors that invested their retirement benefits.
Stephanie Avakian, co-director of the SEC’s Enforcement Division stated that the agency alleged that through aggressive measures, Woodbridge and Shapiro swindled seniors into a business model built on lies which prompted the intervention of SEC’s Miami regional office. Steven Peikin, co-director of the SEC’s Enforcement Division also stated that the agency’s complaint alleged that the firm’s business model was a sham. This is because the only way the business can pay its investors is through the money made from new investors.
The Dangers and Prominence Of Ponzi Scheme
Ponzi scheme is a deadly business that has made many lose their investment, due to the failure that such business encounters in the future. It was very prevalent in the crypto market when the Bitcoin bubble was on.
Dividends are paid to investors from the infusion of funds from new investors, and it is mostly advertised with unrealistic profit to attract investors.