US SEC Announces Woodbridge Group of Companies Has to Pay $1 Billion in Penalties

The U.S. Securities and Exchange Commission (SEC) announced on January 28 that Woodbridge Group of Companies LLC has to pay $1 billion in penalties and disgorgements. The decision was taken by a federal court in Florida after considering the company operated a Ponzi scheme aimed at retail investors.

It is important to mention that the penalties are paid to the government. However, disgorgements have to be paid to the parties that have been affected by the Ponzi scheme. The firm will have to pay $892 million in disgorgement to those investors that have been affected by the firm's promotions.

The former owner and CEO of the Woodbridge Group, Robert Shapiro, has to disgorge $18.5 million and other interest in ill-gotten gains. Additionally, he will have to pay a $100 million civil penalty.

As the cryptocurrency market expanded, several companies decided to release scams and other fraudulent schemes for retail investors to place their funds. Back in 2017, the SEC decided to take action against Woodbridge Group and Mr. Shapiro by issuing an emergency filing against them. Some of the investors affected were placing their retirement funds in this project.

Stephanie Avakian, the co-director of the Enforcement Division at the SEC, commented:

“We allege that through aggressive tactics, Woodbridge and Shapiro swindled seniors into a business model built on lies, which the SEC’s Miami Regional Office staff moved to halt.”

Steven Peikin, the co-director of the SEC’s Enforcement Division, commented that their “complaint alleges that Woodbridge’s business model was a sham.”

Without new investors entering this project, Woodbridge was not able to pay older investors.

There have been different Ponzi schemes in the market. Perhaps, one of the most popular Ponzi and pyramid schemes was BitConnect. This project fell at the beginning of 2018 and thousands of individuals were affected by this project.

The U.S. SEC has also been trying to have a more active presence in the cryptocurrency market. As different scams starting to take place in the space, the regulatory agency of the United States wants to have under control the business activities conducted by different participants. Avoiding scams and fraudulent companies is one of the main activities related to the SEC.

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