Alleged Ponzi scheme mastermind Robert Shapiro and related companies have agreed to pay more than $125 million to settle civil fraud charges, but the settlement won’t necessarily mean much cash for bilked investors, WSJ Pro Bankruptcy reported. Shapiro, his Woodbridge Group of Cos. and related businesses were accused of defrauding thousands of investors in a suit brought last year in federal court in Florida by the Securities and Exchange Commission. A proposed settlement of that suit calls for Shapiro to pay a $100 million penalty, and to return millions of dollars obtained on false premises. Read closely, the SEC federal court filings describe a judgment consented to by Shapiro, who neither admits nor denies the fraud allegations. Once the judgment is approved, the SEC will still have to take action to collect the cash. The problem is, Shapiro doesn’t have the money, according to lawyers working to recover money for Woodbridge investors.
Robert Shapiro, the former Chief Executive Officer of Woodbridge Group of Companies, agreed to pay $120 million to the U.S. Securities and Exchange Commission to settle allegations he defrauded investors in a $1.2 billion real estate Ponzi scheme that drove his company into bankruptcy, according to court papers, Bloomberg reported. Shapiro didn’t admit or deny the allegations. Shapiro promised returns of as high as 10 percent from investments in developers who flipped luxury real estate but instead their cash flowed into a web of related companies that Shapiro controlled, the SEC said. He then used money from new investors to repay earlier ones and spent at least $21 million to charter planes, pay country club fees and buy luxury items, according to the agency’s filing. Shapiro, his wife Jeri, and the various Shapiro-owned entities named as defendants in the SEC suit are together responsible for paying $892 million to the commission, according to the documents filed Oct. 25 in federal court in Miami. The fines will go into a ”fair fund” which will be used to compensate the victims of the Ponzi scheme, the documents said.
Two senior Goldman Sachs bankers paid bribes and stole and laundered money from a Malaysian sovereign-wealth fund, U.S. prosecutors allege, putting the bank at the center of one of the biggest financial frauds in history, the Wall Street Journal reported. Former Goldman partner Timothy Leissner, then its head of Southeast Asia, pleaded guilty to conspiring to launder money and violate foreign antibribery laws for helping siphon off billions of dollars from the fund, known as 1Malaysia Development Bhd, or 1MDB, according to filings unsealed yesterday. Former Goldman managing director Roger Ng, and the alleged mastermind of the fraud, Malaysian financier Jho Low, were indicted on three counts of conspiring to violate foreign antibribery laws and launder money.
Federal regulators have ramped up their pursuit of traders who use a bluffing tactic known as spoofing to manipulate market prices, enforcement officials said, leading to a record number of manipulation cases, the Wall Street Journal reported. As part of the push, the Commodity Futures Trading Commission earlier this year quietly began receiving daily sets of market data from the world’s largest futures exchange, CME Group Inc. CME handles around 85 percent of total U.S. futures-markets trading by volume. Regulators for the first time now have access to daily trading data with a one-day delay, giving them a much broader window into trading activity — and possible manipulation. Previously, the CFTC largely relied on CME staff and whistleblowers to spot spoofing. The data-sharing agreement, effective as of February, comes as the CFTC and Justice Department both pursue traders engaged in spoofing, a practice outlawed by the 2010 Dodd-Frank Act. The CFTC brought a record 26 cases related to manipulative conduct and spoofing in the fiscal year ended Sept. 30. Several of those civil cases were accompanied by criminal charges filed by the Justice Department. Between 2009 and 2016, the average number of such cases brought was just five a year.
The Securities and Exchange Commission charged a former insurance industry wunderkind with fraud, claiming he and an associate diverted more than $300 million from insurers they controlled and caused the companies to become insolvent, the Wall Street Journal reported. The civil charges against Alexander Chatfield Burns include allegations that he and the associate “raided those insurance companies of their funds” and replaced them with assets that were either worthless or grossly overvalued, including a supposed Caravaggio painting “of questionable authenticity.” The alleged scheme was carried out by a New York-based company, Southport Lane Management LLC, that Burns created while in his early 20s. Through Southport, Burns and associates gained control of several insurance companies starting in 2013, then allegedly began diverting the insurers’ assets. The alleged scheme collapsed in early 2014, when Burns checked into a mental-health ward at New York’s Bellevue Hospital, leaving behind an affidavit describing an unusual series of asset transfers.
The disgraced organizer of the disastrous Fyre music festival in the Bahamas, an audacious scheme that defrauded investors and left hundreds of ticket buyers stranded on an island, was sentenced yesterday to six years in prison by a federal judge in Manhattan, the New York Times reported. The organizer, Billy McFarland, was also sentenced for running a sham ticket-selling business — but that fraud was run-of-the-mill compared with the Fyre Festival, which had been promoted by A-list social media influencers but imploded just as publicly on Instagram and Twitter. McFarland had promised an event with luxury accommodations and performances by bands like Blink-182. But the festival never took place, leaving attendees wandering unfinished sites on the island of Great Exuma in the Bahamas. In March, Mr. McFarland pleaded guilty to two counts of wire fraud after investigators concluded that he had defrauded investors in his company, Fyre Media, as well as a subsidiary that had promoted the music festival, resulting in $24 million in losses. Then in July, Mr. McFarland pleaded guilty to two more counts of fraud related to another company that he ran while out on bail that sold fake tickets to fashion, music and sports events and was said to have cost at least 30 victims a minimum of about $150,000.
The trustee cleaning up after Bernard Madoff’s Ponzi scheme, and dozens of investors he is suing, are revisiting the central question of finding out when Madoff started stealing, WSJ Pro Bankruptcy reported. Since Madoff’s 2008 arrest, liquidating trustee Irving Picard has filed more than 1,000 lawsuits against customers of the phantom investment firm who collected more in Ponzi-scheme proceeds than they invested. Most have been resolved through settlements. Of the 147 defendants that are still holding out, 92 are pointing to sworn testimony obtained through a court-authorized deposition from Mr. Madoff in 2016 and 2017 in the North Carolina prison where he is serving a 150-year sentence. The fraudster’s statements are touching off an investigation that could offer fresh details into the machinations inside his firm. The holdouts’ defense against Picard turns largely on when Madoff stopped buying and selling securities and embarked on his infamous fraud. The trustee has calculated how much each defendant owes based on the amount of fictitious profits he or she received — subtracting the stolen money received from the funds put in.
New York’s attorney general yesterday sued 10 companies and two executives over their alleged roles in a scam to induce thousands of struggling borrowers into buying student loan debt-relief services that they could have received for free, Reuters reported. Barbara Underwood, the attorney general, said defendants typically charged more than $1,000 for their services, which often came with usurious interest rates, after luring borrowers with false claims such as being affiliated with the government, or that their help was needed. “It strikes me that the lawsuit has merit,” Mark Kantrowitz, publisher of Savingforcollege.com, said in an interview. “There are companies that can take advantage of borrowers’ lack of awareness of what they can do.” The defendants include Debt Resolve Inc. of Hawthorne, N.Y., Chief Executive Bruce Bellmare and his predecessor Stanley Freimuth. Hutton Ventures LLC, a Santa Ana, Calif.-based business partner of Debt Resolve, and Equitable Acceptance Corp, a Minnetonka, Minn.-based financing company, are also among the defendants.
