Sales in Unregistered Securities Are Soaring but It Comes at a Cost - Part 1

Posted on May 2nd, 2019 at 4:40 PM
Sales in Unregistered Securities Are Soaring but It Comes at a Cost - Part 1

From the Desk of Jim Eccleston at Eccleston Law LLC:

This is the first in a series which highlights an InvestmentNews article concerning the recent uptick in the sale of unregistered securities and how those transactions have resulted in the proliferation of fraudulent schemes.

To begin, Regulation D offerings, which are a public type of offering, has more than quadrupled from 18,295 in 2009 to 37l,785 in 2017. Notably, brokers and investment advisers are able to sell those private securities to the public without facing the same regulatory scrutiny as with registered securities, making those offerings opaque and hazardous. Moreover, brokers or investment advisers often market the investment as an alternative to the stock market that can purportedly beat the return on bonds or bank deposits. In addition, Regulation D investments are known to be marketed heavily at investment seminars, in ads on the radio and in local newspapers.

Woodbridge Group of Companies (Woodbridge), which has recently been the subject of an SEC investigation, is an example of a Regulation D offering which was able to initially avoid public scrutiny until investors faced realized losses.

Recently, Woodbridge agreed to settle a lawsuit filed by the SEC involving allegations that the company ran a $1.2 billion investment fraud scheme that duped more than 8,400 investors. More specifically, in December 2017, the SEC filed a securities action in federal court in Florida, accusing Woodbridge of defrauding its investors through real estate investment deals. According to the SEC, the owner of Woodbridge, Robert Shapiro, used new investor money to pay the returns owed to existing investors in a Ponzi-scheme like manner. Meanwhile, Mr. Shapiro and his family spent an exorbitant amount of investor funds for their personal use, such as to pay for luxury automobiles, jewelry, country club memberships, fine wine, and chartering private planes.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, securities, unregistered securities, regulation d, woodbridge group, sec, lawsuit

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