Uncovering the Woodbridge Ponzi Scheme

During his breakout session at the 36th Annual ACFE Global Fraud Conference, Lavderim Hysa, CFE, CPA, reviewed the strategies and tools the FBI Financial Investigative Team used to uncover the largest real estate Ponzi scheme in Miami, Florida’s history. The mastermind behind the scheme that defrauded 8,400 investors of $1.3 billion was Robert Shapiro, former owner of Woodbridge Investments. 

As defined by the American Institute of Certified Public Accountants, “a Ponzi or pyramid scheme is usually any venture wherein earlier investors are repaid principal plus interest with funds provided by later investors.” Hysa simplified this with an illustration involving “Peter” and “Paul,” where the fraudster robs Peter to pay Paul, and they both end up being victims. 

Characteristic of a Ponzi scheme, Hysa explained that, like many influential fraudsters, Shapiro had a unique ability to connect with people and buy their trust. He also “liked to lead a high life with other people’s money.” Shapiro promised investors a steadily increasing monthly rate of return that was “too good to be true” and had to constantly bring in new investor funds. Shapiro also held total ownership of the enterprise and his investors’ money. He was the sole signer on bank accounts and managed his accounting personnel who lacked experience and competency, among other red flags. 

Hysa and his team collaborated with the Securities Exchange Commission to analyze more than 164 bank and credit card accounts and 470,000 lines of bank and credit card transactions — Hysa noted that his IT team had to replace his computer twice. By “following the money,” the No. 1 rule in financial investigations, they traced Shapiro’s use of funds and noted reasonable personal versus luxurious expenses. They discovered the investors’ principal funds weren’t being used for what Woodbridge claimed, instead going towards a $90 million historic mansion for Shapiro and other lavish expenses. Although Woodbridge’s financial crisis occurred between 2012 and 2017, they went back earlier to pinpoint when Shapiro started lying, or in other words to determine “clean money versus dirty money.” 

Shapiro was sentenced to 25 years in prison, but the scheme had a devastating impact on his victims. Most of Woodbridge’s investors were veterans, teachers and doctors. Hysa noted that one retired military pilot lamented that he might have to sell his house. Another victim stated, “We worked two lifetimes for the money we earned. … Our happy retirement as we know it is over. We have been sentenced to life, and we don’t deserve this.”