The luxury California real estate investment firm Woodbridge Group of Companies LLC has filed for Chapter 11 bankruptcy as part of a process “intended to restructure its approximately $750 million in debt.”
The bankruptcy filing means that thousands of individual investors are at risk of losing hundreds of millions of dollars. The investors may also be entitled to immediate relief by filing a claim in the bankruptcy proceedings, but time is limited.
Woodbridge CEO Robert Shapiro resigned, but he will take on a consulting role with monthly fee of $175,000, which will be paid to WFS Holding Co., an entity he controls, according to court documents.
Woodbridge raised over $1 billion from investors. The bankruptcy comes as the Securities and Exchange Commission investigates whether the company “operated a fraud on its investors.”
The SEC wrote in an October 31 filing:
Woodbridge has represented to investors that bona-fide third parties are borrowing money and repaying interest at a high rate, of which the investors in Woodbridge funds get a portion thereof. … However, evidence obtained in our investigation reveals that many, if not all, of these LLCs may be Woodbridge affiliates with Shapiro as their manager.”
The Chapter 11 filing in U.S. Bankruptcy Court in Delaware cited “unforeseen costs associated with ongoing litigation and regulatory compliance.”
In August 2017, the SEC subpoenaed a total of 235 LLCs that are believed to be owned or controlled by Robert Shapiro, but did not receive a sufficient response. The Commission has been investigating Woodbridge since 2016.
The bankruptcy was filed in the U.S. Bankruptcy Court, District of Delaware (Wilmington) — In RE: Woodbridge Group of Companies LLC — Case No. 17-12560.