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SEC Charges Unregistered Brokers in Sales of Bankrupt Woodbridge Securities

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The Securities and Exchange Commission on Monday charged five individuals and four companies for unlawfully selling securities of the bankrupt Woodbridge Group of Companies LLC to retail investors, reaping more than $5.8 million in sales commissions.

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.

From at least April 2013 through December 2017, the Florida-based defendants named in the SEC’s complaints — Barry M. Kornfeld, Ferne Kornfeld, Lynette M. Robbins, Andrew G. Costa, Albert D. 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, according to the SEC order.

Barry Kornfeld also violated a prior SEC order which barred him from acting as a broker.

The defendants collectively earned more than $5.8 million in transaction-based sales commissions and pitched investors via TV, radio and newspaper ads, as well as emails, social media and at in-person meetings and investment seminars — and routinely touted Woodbridge’s securities as “safe and secure.”

“The broker-dealer and securities registration provisions are vital protections for retail investors,” said Eric Bustillo, director of the SEC’s Miami Regional Office, in a statement. “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.”

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,” the SEC states.

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, according to the agency.

The SEC’s monetary claims against Woodbridge remain pending, the agency reports.

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.

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.


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