SEC Charges Unregistered Brokers Who Sold Woodbridge Securities to Retail Investors
The Securities and Exchange Commission has charged five individuals and four companies for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors.
The Securities and Exchange Commission has charged five individuals and four companies for unlawfully selling securities of Woodbridge Group of Companies LLC to retail investors. Woodbridge collapsed into bankruptcy in December 2017 and the SEC previously charged the company, its owner, and others with operating a $1.2 billion Ponzi scheme.
The Florida-based defendants named in the SEC’s complaints, Barry Kornfeld, Ferne Kornfeld, Lynette Robbins, Andrew Costa, Albert Klager, and their companies, were among Woodbridge’s top revenue producers, selling more than $243 million of its unregistered securities to more than 1,600 retail investors.
The complaints allege that defendants reaped millions of dollars in commissions even though they were not registered as broker-dealers and were not permitted to sell securities. Barry Kornfeld also 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 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.”
According to the SEC’s complaints, the defendants claimed that Woodbridge was 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. The SEC alleges that Klager pitched Woodbridge investments in newspaper ads while Costa recommended them during a radio program he hosted, and Robbins used radio, television, and internet marketing.
Once Woodbridge filed for bankruptcy, investors stopped receiving monthly interest payments and have not received a return of their investment principal. Woodbridge has since agreed to settle the liability portion of the SEC’s charges, without admitting or denying the allegations, and reached a resolution with the SEC and creditors in a bankruptcy action regarding the ongoing control and management of Woodbridge. The SEC’s monetary claims against Woodbridge remain pending.
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 First Financial, Costa Financial Insurance Services Corp., and Atlantic Insurance & Financial Services Inc., respectively.
Robbins and her company, Knowles Systems Inc., agreed to settle the SEC’s charges in a separate action without admitting or denying the allegations and return more than $1 million of allegedly ill-gotten gains plus interest. Robbins also agreed to pay a $100,000 civil penalty and to an industry and penny-stock bar.
The SEC’s investigation, which is continuing.
