Oregon hits investment firm with order after costly scam

The Oregon Department of Consumer and Business Services’ Division of Financial Regulation said Thursday it has issued a cease-and-desist order against Woodbridge Mortgage Investment for running an unfortunately all-too-common real estate – also known as a promissory note – investment scam.

The agency said Woodbridge raised money from about 70 Oregonians for an investment program that was not registered with the division. It said Woodbridge salespersons, most of whom were not licensed to sell investments, promised investors that their money would be secured by a mortgage in real estate. The division’s investigation revealed that Woodbridge did not in fact record any mortgages.

In December 2017, Woodbridge stopped making interest payments and filed for bankruptcy. Because Woodbridge failed to record mortgages on the real estate, investors were treated as general unsecured creditors in the bankruptcy case. Also in December 2017, the SEC filed a lawsuit against Woodbridge alleging a $1.2 billion Ponzi scheme and several other states have taken similar action against Woodbridge.

“Short-term promissory notes entice investors by promising a quick turnaround on their investment,” said Andrew Stolfi, division administrator. “Investors must be cautious, because notes with durations of nine months or less may not be registered or even covered by federal or state securities laws.”

Promissory notes, a leading source of securities complaints nationwide, are a promise to pay a specified sum of money at a stated time. The notes are similar to a loan and generally pay interest. Last year, 210 note investigations and 149 enforcement actions were taken by state regulators.

In Oregon, five investigations resulted in five enforcement actions.

The division provided these four tips to protect yourself before investing in a promissory note:

1. Call the division’s consumer advocacy team at 888-877-4894 (toll-free) to confirm that the notes are registered or legally exempt from registration.

2. Research the company. Understand how it will pay principal and interest on the note, as well as the costs to promote it, and find out the seller commissions.

3. Be suspicious of notes offering a high guaranteed rate of return.

4. If repayment is secured by an interest in real estate, confirm with a third party that a mortgage or trust deed is recorded on the property, and that no other liens exist.

Promissory notes encourage many types of investment scams. A written guarantee is not proof of a note’s legitimacy. Before making any financial decisions, ask questions, do your homework and contact the agency’s advocates at 888-877-4894 (toll-free) with questions about the product or person selling it.

Learn more at dfr.oregon.gov.

About DCBS: The Department of Consumer and Business Services is Oregon’s largest business regulatory and consumer protection agency. For more information, visit www.dcbs.oregon.gov.

About Oregon DFR: The Division of Financial Regulation is part of the Department of Consumer and Business Services, Oregon’s largest business regulatory and consumer protection agency. Visit www.dcbs.oregon.gov and http://dfr.oregon.gov/Pages/index.aspx.