(Reuters) - U.S. federal prosecutors charged the owner and two former executives of Woodbridge Group of Companies LLC on Thursday with orchestrating a $1.3-billion Ponzi scheme involving 10,000 victims.
Robert Shapiro, the owner of the luxury-property company, and former directors of investments Dayne Roseman and Ivan Acevedo were charged in the Southern District of Florida with conspiracy to commit mail and wire fraud and substantive mail fraud counts, the Department of Justice (DOJ) said in a statement.
Separately, the U.S. Securities and Exchange Commission also charged on Thursday Acevedo and Roseman for their roles in the scheme. It had charged Woodbridge and Shapiro previously.
Shapiro and the other two former Woodbridge employees were arrested on Thursday in California and presented before a U.S. Magistrate Judge in the Central District of California, the DOJ said.
Shapiro was ordered to be detained in prison, while Roseman and Acevedo were ordered to appear in the Southern District Florida for their arraignment, the date for which had not yet been scheduled.
According to the indictment, Shapiro took about $35 million in investor money for his benefit, spending millions on personal expenses such as chartering private planes and buying luxury cars, a house, and paying personal income taxes and his ex-wife.
The company had filed for bankruptcy in December 2017 citing costs of expansion, litigation and a government fraud investigation and was then sued by the SEC for allegedly running an investment fraud selling unregistered securities to raise funds to repay earlier investors.
Woodbridge, which reached a deal with the government last year to appoint a new board and pay for legal representation for thousands of alleged victims, emerged from bankruptcy in February.
On Thursday, Shapiro and Roseman were charged with substantive wire fraud counts and additionally, Shapiro was charged with conspiracy to commit money laundering and evasion of payment of federal income taxes, the DOJ said.
“The conspiracy ran from July 2012 to December 2017, and involved material misrepresentations and material omissions to investors in the sale of Woodbridge investments,” the DOJ said.
According to the SEC complaint, Acevedo and Roseman were responsible for hiring and training Woodbridge’s sales force, and approving fraudulent marketing materials and sales scripts. They helped create the impression that Woodbridge was a legitimate operation when in reality it was a Ponzi scheme, the SEC said.
The company in January settled $1 billion in penalties levied by the SEC but did not admit or deny the allegations at that time.
Reporting by Philip George in Bengaluru; Editing by Shreejay Sinha