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Complaint Alleges Shopoff Securities Fraudulently Sold $12.6 Million of Promissory Notes

FINRA's Department of Enforcement alleges that William Anthony "Bill" Shopoff, Stephen Robert Shopoff, and their firm, Shopoff Securities of Irvine, California fraudulently sold nearly $12.6 million of promissory note investments to at least 29 investors from 2010 through 2017, purportedly to fund William Shopoff's private real estate firm. FINRA also alleges that when a Shopoff-controlled fund began to fail, the respondents used newer investor funds to repay older investors, all while continuing to solicit sales in one of the various Shopoff funds.

Complaint #2016048393501

The complaint alleges that Shopoff Securities CEO Bill Shopoff (CRD #1273471) and Senior VP for Investor Relations Steve Shopoff (CRD #5276325) failed to disclose that the Shopoffs' assets were largely illiquid, that some of the proceeds would be used to pay Bill Shopoff's personal expenses (FINRA found that $165,000 was used to pay for Shopoffs' personal expenses), and that the Shopoffs recommended unsuitable notes to their customers.

FINRA charged that Shopoff Securities "massively inflated" assets in a financial statement, wilfully violated the Securities Exchange Act, and unsuitably recommended customers invest in TSG Fund IV, LP, with a stated purpose of raising funds for Shopoff Realty Investments, LP.

FINRA Enforcement charged that Fund IV's private placement memorandum (PPM) was outdated and deficient, writing that the offering documents for Fund IV contained material misrepresentations and omissions of material facts.

For example, FINRA found that the PPM stated that Shopoff Realty's debt was $2.8 million when the debt was, in fact, $22.6 million. FINRA also found that whereas Fund IV's PPM purportedly stated it would generate $40 million in profits and commissions through real estate project sales in Southern California, the Shopoffs actually experienced losses from the projects.

FINRA wrote that as time went by, the Shopoffs founded and solicited investments in a new entity called Shopoff Enterprises, eventually using the funds raised through Shopoff Enterprises to pay off earlier investors in Fund IV, all while failing to disclose this and other financial difficulties to customers.

In the end, FINRA charged the Shopoffs with fraud in the sale of both TSG Fund IV and Shopoff Enterprises, unsuitable recommendations, and fraud in the sale of additional private placements known as Shopoff Land Fund III and Shopoff Land Fund IV.

In 2008, the Shopoffs were featured in an OC Register investigative report that probed whether a developer—identified as Shopoff—offered critics $1 million as "'hush money' to go away" from a luxury homes project next to Chino Hills State Park. Bill Shopoff also has two short sale financial compromise disclosures in his BrokerCheck file.

If you have experienced losses after investing with Orange County, California's William A Shopoff, his brother Stephen R Shopoff, Shopoff Securities, or any of the Shopoff Realty funds, having been solicited to invest in the Shopoff's fraudulent and unsuitable promissory notes or related products, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.

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