Guy down the street goes to jail for $billion RE scam (SOCAL)

[Alex Bekeza]

We used to see these guys in the same restaurants we'd hit on our lunch breaks on Ventura Blvd.  Remain diligent on where your money is going!

https://www.latimes.com/business/la-fi-shapiro-woodbridge-ponzi-arrested-20190411-story.html

Prosecutors said the Ponzi scheme was orchestrated from Woodbridge’s offices throughout the United States, including in Sherman Oaks, where it is headquartered, and in Boca Raton, Fla., where it was previously headquartered.

High-pressure sales tactics were used to secure money for what were promised to be “low risk” and “conservative” investments, but in reality the funds were funneled to real estate owned by Shapiro, according to the U.S. attorney’s office.

Woodbridge eventually became financially insolvent, the scheme began to unravel, and Shapiro in 2017 considering filing for bankruptcy, prosecutors said.

Still, he, Roseman and Acevedo continued to sell the fraudulent investments without telling investors Woodbridge was on the verge of collapse, according to the indictment. From October to December of 2017, they brought in more than $52 million in investor money before filing for Chapter 11 bankruptcy in December 2017.

Prosecutors said filing for bankruptcy caused investors to suffer substantial losses on their $1 billion in principal. At least 2,600 victims invested their retirement savings, totaling about $400 million.

Shapiro siphoned off $35 million for his own benefit, according to prosecutors, spending $3.1 million for chartering private planes and travel, $6.7 million on a home, $2.6 million on home improvements, $1.8 million on personal income taxes, $1.4 million for his ex-wife, and more than $672,000 on luxury automobiles.

Roseman received $2.5 million for himself and Acevedo received $1.1 million, prosecutors said.

The Securities and Exchange Commission’s previous enforcement action in 2017 was settled in January for a total of $1 billion in penalties and disgorgement of ill-gotten gains, the agency said. The defendants — Woodbridge, 281 related companies and Shapiro — did not admit or deny the allegations.

Woodbridge, according to the SEC, told investors it would use their money to make so-called hard money loans — a type of expensive, short-term loan that’s secured by property and is often used by house flippers and other property developers. Instead, the SEC alleges, nearly all of the funds went directly into Shapiro’s and Woodbridge’s own projects.

[Jonathan Pelanne]

Madness. As someone who has seen both the upside and downside of real estate investments it is imperative to find someone who is trustworthy, realistic, and experienced when partnering on an investment, be it real estate or something else.