The Feds say they just blew up a $1.2 billion Ponzi scheme aimed at thousands of elderly people in Florida

  • The US Securities and Exchange Commission has filed charges against Robert H. Shapiro, alleging that he bilked investors — many of them senior citizens — out of $1.2 billion as part of a Ponzi scheme.
  • All remaining assets have been frozen as the SEC pursues its case, which includes charges of fraud and violations of broker-dealer registration provisions.

The US Securities and Exchange Commission has filed charges against a group of unregistered investment funds and their owner, alleging a $1.2 billion Ponzi scheme.

Robert H. Shapiro is being accused of using a group of unregistered investment firms, collectively called the Woodbridge Group of Companies LLC, to defraud more than 8,400 investors — many of them senior citizens. Formerly headquartered in Boca Raton, Florida, the company allegedly promised to pay investors interest of 5% to 10% annually.

RELATED: 5 foolish mistakes investors make everyday

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#1. Chasing performance
"Investing in the stock market is a numbers game. You want to see a return otherwise you're treading water at best. Countless times I would hear investors say, "I've only seen X% return in the past quarter!" and want to jump ship. This short-term thinking often gets you nowhere and brings added commission costs." -InvestmentZen
#2. Thinking you can beat the market
"The twin sibling of chasing performance is believing you can time the market. In many cases, market timing results in investors selling low and buying high – the opposite of what we should be trying to accomplish. As the Peter Lynch quote goes, "There are no market timers in the 'Forbes 400,'" yet the appeal draws many investors who think they can time the market." -InvestmentZen
#3. Listening to the media
"The media may be fodder for a good laugh, but in most cases, they're simply that when it comes to investing. "By far the biggest mistake I see today is letting the media dictate how you invest. While the media is loud and comes from every direction today, they simply don't know what's in your best interests," says Clint Haynes, CMFC® of NextGen Wealth." -InvestmentZen
#5. Ignoring your investments 
"Ignorance can cost investors thousands of dollars in wasted money. Whether it be a corporate action or price plummet, if you never check on your investments, you can lose big." -InvestmentZen
#4. Not being properly diversified
"Proper diversification is a hallmark of sound investing. Sadly, too many think picking a small handful of stocks means they're diversified, without realizing that they're opening themselves up to significant risk.

On the flip side, many investors think that because they invest in mutual funds or Exchange-Traded Funds (ETFs), they're diversified. Little do they realize that if they don't look at what those funds hold, they could own a group of holdings that leaves them more open to risk than they realize." -InvestmentZen

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Woodbridge claimed that its primary business was the issuance of loans to supposed third-party commercial property owners, which they said paid 11% to 15% annual interest. Yet the SEC's complaint alleges that the "vast majority" of borrowers were companies owned by Shapiro that had no income and never made such interest payments.

"Our complaint alleges that Woodbridge’s business model was a sham," Steven Peikin, co-director of the SEC’s Enforcement Division, said in a release. "The only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money.

"Our complaint further alleges that Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers,” added Eric I. Bustillo, director of the SEC’s Miami regional office. “Shapiro used the scheme to line his pockets with millions of investor dollars."

RELATED: 10 states with the most millionaires

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10 states with the most millionaires
High angle view of Venice beach during sunset. Tourists are walking on footpath by ocean. Shot of beautiful nature and people is taken from above.

9. Delaware

  • Population: 952,100
  • Number of households: 361,528
  • Percentage of millionaire households: 0.06 percent
  • Average income for top 1 percent: $769,109
  • Average income for bottom 99 percent: $48,000

Delaware doesn't even rank among the 35 poorest states in the country, but it's the poorest on this list according to median income. The top 1 percent and the bottom 99 percent are separated by a difference of just 16 times in average annual earnings, which is a relatively low rate of economic disparity.

The agriculture, fishing, mining and manufacturing industries continue to dominate the state. Because of its business-friendly atmosphere, more than half of all the publicly traded companies in the U.S. are incorporated in Delaware.

8. Virginia

  • Population: 8.41 million
  • Number of households: 3.22 million
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $988,000
  • Average income for bottom 99 percent: $56,000

Virginia, where eight American presidents were born, has a relatively low level of income inequality, with the top 1 percent earning 18 times more than the bottom 99 percent. Although the commonwealth suffered a significant economic downturn in recent years, several key indicators suggest that things in Virginia are on the upswing.

7. New Hampshire

  • Population: 1.33 million
  • Number of households: 530,424
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $1 million
  • Average income for bottom 99 percent: $57,000

New Hampshire residents enjoy the lowest poverty rate of any state in the entire country, and it also boasts the sixth-best nationwide employment rate over the last five years. The average income earned by the bottom 99 percent is 18 times lower than that earned by the top 1 percent.

6. Massachusetts

  • Population: 6.82 million
  • Number of households: 2.66 million
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $1.7 million
  • Average income for bottom 99 percent: $56,000

A wide income disparity exists between the elite and everybody else in Massachusetts, where the average member of the top 1 percent earns 30 times more than the average member of the bottom 99 percent. Although Massachusetts disappointed many with a shrinking economy and stalled wages in the first quarter of 2017, it quickly came roaring back in the second quarter with a burst of economic growth.

5. Alaska

  • Population: 741,900
  • Number of households: 271,691
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $833,000
  • Average income for bottom 99 percent: $63,000

Although Alaska has a high concentration of millionaires, the state experiences the lowest level of income inequality on this list. The wealthiest residents aren't particularly wealthy, and the rest of the people in the state do comparatively well. The average income for the top 1 percent is just 13 times greater than the average income earned by the rest of the population. The economy of Alaska can't be compared to that of any other state in the U.S., however, as more than four out of five revenue dollars come by way of the energy industry.

4. Hawaii

  • Population: 1.43 million
  • Number of households: 483,329
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $690,000
  • Average income for bottom 99 percent: $51,000

Hawaii's top 1 percenters make just 14 times more than the bottom 99 percent. Like Alaska, Hawaii has a unique economy, dominated by tourism and the military. Hawaiians face a higher cost of living than residents of any other state, as well as the highest housing prices in the U.S. The median home cost is $646,500, which is more than $135,000 higher than the next costliest state.

3. New Jersey

  • Population: 8.94 million
  • Number of households: 3.29 million
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $1.5 million
  • Average income for bottom 99 percent: $57,000

In the Garden State, there is a huge gap between the wealthiest residents and everyone else. The average top 1 percent earns 25 times more than the average member of the bottom 99 percent. New Jersey has the third-highest median household income rate in America — but the people who live there had better do well. The cost of living in New Jersey is among the country's most expensive, and much of the state consists of bedroom communities for people who work in New York or Philadelphia.

2. Connecticut

  • Population: 3.58 million
  • Number of households: 1.38 million
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $2.4 million
  • Average income for bottom 99 percent: $56,000

Although America's biggest millionaire metropolitan area is by far New York City, the Empire State doesn't even make this list — but its neighbor does. Connecticut is home to a higher per-capita rate of millionaire households than all but one other state.

Connecticut also suffers from dramatic income inequality — the state's elite are by far the richest 1 percent in America. The average earner among the lower 99 percent, however, makes 43 times less. The state is also suffering a major fiscal crisis that is impacting its budget, pension fund and tax revenue — and the capital city of Hartford is teetering on the brink of bankruptcy.

1. Maryland

  • Population: 6.02 million residents
  • Number of households: 2.66 million
  • Percentage of millionaire households: 0.07 percent
  • Average income for top 1 percent: $1 million
  • Average income for bottom 99 percent: $60,000

Leading the list of top 10 richest states according to millionaire concentration is Maryland, the most millionaire-dense state in the country. Home to one of the most educated workforces in the U.S., Maryland enjoys the second-lowest poverty rate in America.

On the border of the nation's capital, the small but influential state boasts the highest median income in America and is still among just 11 states that hold the coveted AAA bond rating.

Maryland has the most millionaires, but what is the richest state in the U.S. in terms of median household income? You guessed it. That's also Maryland.

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Shapiro and Woodbridge are also accused of trying to keep investors from exiting their positions at the end of their terms, and in turn, boasted of a 90% renewal rate in marketing materials. Further, they allegedly paid $64.5 million in commissions to sales agents who pitched the opportunities as "low risk" and "conservative" to potential clients.

The complaint also alleges that Shapiro funneled $21 million to himself, then spent that on chartered planes, country club fees, luxury vehicles, and jewelry.

The SEC is pursuing the case in the wake of the alleged Ponzi scheme's collapse in early December, which came as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection, the complaint said. The commission has also frozen all affiliated assets.

Shapiro, Woodbridge, and certain related companies are being charged with fraud and violations of the securities and broker-dealer registration provisions of federal securities laws. As part of the proceeding, the SEC is pursuing the "return of the allegedly ill-gotten gains with interest and financial penalties."

An initial court hearing has been scheduled for December 29, 2017.

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