Unlawful Securities Sale

The Securities and Exchange Commission charged four companies and five individuals for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors. Woodbridge filed for bankruptcy in December 2017. The Woodbridge owners were previously charged with operating a $1.2 billion Ponzi scheme.

The SEC named Barry Kornfeld, Ferne Kornfeld, Lynette Robbins, Andrew Costa, Albert Klager and their companies in its complaint. Allegedly, these individuals were among Woodbridge’s top revenue producers, selling more than $243 million of its unregistered securities to more than 1,600 retail investors.

The SEC complaint alleges that the defendants reaped millions of dollars in commissions on their sales of Woodbridge securities.

However, the complaint says none of them were registered as broker-dealers. Therefore, they were prohibited from selling securities. Additionally, Barry Kornfeld allegedly violated a prior SEC order which barred him from acting as a broker.

“The broker-dealer and securities registration provisions are vital protections for retail investors,” said Eric I. Bustillo, director of the SEC’s Miami regional office. “Our actions allege the defendants, while not registered as broker-dealers, pocketed millions of dollars in unlawful commissions from their widespread sales of unregistered Woodbridge securities.”

Per the SEC’s complaint, the defendants boasted Woodbridge as a “safe and secure” investment. The Kornfelds allegedly solicited investors at seminars and a “conservative retirement and income planning class” they taught at a Florida university.

Furthermore, the SEC alleged that Klager pitched Woodbridge investments in newspaper ads. Meanwhile, Costa recommended the investments during a radio program he hosted. Finally, Robbins used radio, television and internet marketing to sell the securities.

The Inevitable Bankruptcy

When Woodbridge finally filed for bankruptcy, the investors stopped receiving monthly interest payments. Not only that, they did not receive a return of their investment principal.

Woodbridge has agreed to settle the liability portion of the SEC’s charges without admitting or denying the allegations. Part of the Woodbridge settlement deal involved reaching a resolution with the SEC and creditors regarding the ongoing control and management of Woodbridge.

In its latest actions, the SEC filed charges seeking court-ordered injunctions, return of allegedly ill-gotten gains with interest and financial penalties against the Kornfelds, Costa, Klager and their companies.

Similar to Woodbridge, Robbins and her company, Knowles Systems Inc., agreed to settle the SEC’s charges in a separate action. Robbins agreed to return more than $1 million of allegedly ill-gotten gains plus interest. Robbins also agreed to pay a $100,000 civil penalty and to accept an industry and penny stock bar.