Securities Commissioner sanctions Woodbridge Mortgage Investment Funds

DENVER — The Colorado Securities Commissioner has signed an order against Woodbridge Mortgage Investment Funds 1, 2, 3, and 3A, collectively known as “the Woodbridge Funds.” The order directs Woodbridge to immediately cease and desist from all violations of the Colorado Securities Act, to include the use of unlicensed sales representatives to solicit and sell unregistered non-exempt securities, and fraudulent statements and omissions of fact related to the sale of securities. This decision comes on the heels of a number of cease and desist orders against various persons doing business in Colorado who sold Woodbridge products to their clients.

According to the Division of Securities, part of the Department of Regulatory Agencies (DORA), the respondents utilized a method whereby investors were issued promissory notes in exchange for investments that went toward backing hard money loans secured by commercial property, called “First Position Commercial Mortgages.” Investors were guaranteed fund payments even in the instance of a hard money loan default.

The Woodbridge Funds allegedly hired unlicensed agents to solicit or sell securities, and it is suspected that many investors were persuaded to roll over retirement account funds into the Woodbridge products. Further, the First Position Commercial Mortgages being secured by notes to investors were neither registered nor exempt from registration with the Commissioner.

The Division alleges that in the pursuit of these investments, the respondents and their agents made misleading statements to investors regarding the lack of proper registration and licensure, qualifications of the fund managers, the company’s ability to pay back investors should the loans default, and the risks involved in the investments. Investors were also kept in the dark about the fact that the Woodbridge Funds and companies had already been sanctioned by securities divisions in Massachusetts and Texas for similar violations.

Since Colorado’s initial action in January, the United States Securities and Exchange Commission has charged Woodbridge’s operators with conducting a $1.2 billion Ponzi scheme. The case is pending.