[W]oodbridge advertised its primary business as issuing loans to supposed third-party commercial property owners paying Woodbridge 11-15% annual interest for "hard money," short-term financing. In return, Woodbridge allegedly promised to pay investors 5-10 percent interest annually. Woodbridge and Shapiro allegedly sought to avoid investors cashing out at the end of their terms and boasted in marketing materials that "clients keep coming back to [Woodbridge] because time and experience have proven results. Over 90% national renewal rate!" While Woodbridge claimed it made high-interest loans to third parties, the SEC's complaint alleges that the vast majority of the borrowers were Shapiro-owned companies that had no income and never made interest payments on the loans.The SEC complaint alleges that Shapiro and Woodbridge used investors' money to pay other investors, and paid $64.5 million in commissions to sales agents who pitched the investments as "low risk" and "conservative." Shapiro, of Sherman Oaks, California, is alleged to have diverted at least $21 million for his own benefit, including to charter planes, pay country club fees, and buy luxury vehicles and jewelry. According to the complaint, the scheme collapsed in typical Ponzi fashion in early December as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection.
FINRA found that during a nine-year review period, Raymond James' email review system was flawed in significant respects, allowing millions of emails to evade meaningful review. This created the unreasonable risk that certain misconduct by firm personnel could go undetected by the firm. The combinations of words and phrases - otherwise known as the "lexicon" - used to flag emails for review were not reasonably designed to detect certain potential misconduct that Raymond James, in light of its size, structure, business model, and experience from prior disciplinary actions, knew or should have anticipated would recur from time to time. The firm also failed to devote adequate personnel and resources to the team that reviewed emails flagged by the system, even as the number of emails increased over time.FINRA also found that Raymond James did not periodically test the configuration and effectiveness of its lexicon-based email surveillance system. The firm's primary focus was reducing the number of "false positives" that would need to be reviewed rather than ensuring that the system was effectively identifying all potentially problematic categories of emails.
[I]nvestor funds were not used as Peters claimed. Peters allegedly spent at least $4.4 million on such personal endeavors as remodeling a large farm in North Carolina, purchasing fine art for his home, and constructing a vacation home in Costa Rica. Peters also spent at least $4.9 million to make Ponzi payments to earlier investors.