Woodbridge Group of Cos. has reached a settlement with its creditors and the Securities and Exchange Commission, and the company has named a new chief executive to steer the company out of Chapter 11 bankruptcy.
The SEC had sued the Sherman Oaks-based real estate investment firm for cheating investors out of more than $1 billion in a classic Ponzi scheme.
“The new management team is cognizant of the difficult position that creditors and investors are in and is fully committed to the mission of achieving the best possible results for all of them,” Michael Goldberg, a member of Woodbridge’s board of managers, said in a statement.
Frederick Chin, a real estate advisor and business consultant, will serve as chief executive, while Bradley Sharp will be chief restructuring officer. Sharp previously was chief executive of the L.A. offices of Development Specialists Inc.
The settlement agreement also includes the appointment of fiduciary groups for Woodbridge investors, the company said.
Woodbridge and its founder Robert H. Shapiro were sued by the SEC on Dec. 22 – just weeks after the company filed for Chapter 11 protection – for allegedly defrauding more than 8,400 investors who were led to believe that their funds would be used for high-interest real estate loans. Instead, new investors’ money was used to pay interest and returns to established investors, the SEC claimed. Also, Shapiro was accused of squandering as much as $21 million on himself and his family, including money spent on private jets, fine wine and luxury goods.
Woodbridge cut ties with Shapiro early last month and later appointed a new management board to initiate an executive search. It also formed committees to represent creditors’ and investors’ interests in its bankruptcy proceedings. In turn, the SEC agreed to drop its request for a court-ordered receiver.