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Woodbridge Trustee Seeks Relief In California's Corporate Securities Law

On Monday, the trustee of the Woodbridge Liquidation Trust filed a lawsuit against numerous law firms and lawyers.  The trustee's lawsuit relates to the reportedly $1.3 billion Ponzi scheme allegedly orchestrated by Robert H. Shapiro.  In February 2018, the California Department of Business Oversight issued this consent order against Mr. Shapiro and various Woodbridge companies. According to the complaint, Mr. Shapiro was sentenced in October to 25 years in prison.

The trustee's complaint caught my eye because it was filed in the Los Angeles Superior Court and alleges violations of California Corporations Code Sections 25401 and 25504.1.  Readers of this blog will know that Section 25401 was originally based on Section 12(a)(2) of the Securities Act of 1933.  In 2013, however, the legislature amended Section 25401 to mirror Rule 10b-5 under the Securities Exchange Act of 1934.  See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But "We Are Against Fraud Aren't We?  In response to criticism from this author, the legislature enacted legislation in 2015 returning Section 25401 to its original text.  See California Reverts To Former Securities Anti-Fraud Statute.

Because the complaint relates to activities during this period, it will be interesting to see which version or versions of Section 25401 the court will apply.

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