The Woodbridge Group of Companies filed for bankruptcy in early December 2017.
The SEC sued to freeze its assets, accusing the group of selling unregistered securities to raise funds to repay earlier investors, reports Reuters.
More than 40 lawyers were present at the bankruptcy court hearing in Wilmington, Delaware on Wednesday, as creditors, investors and authorities sought to protect their interest in the remaining assets.
According to the SEC’s complaint dated 20 December, Woodbridge’s owner Robert Shapiro used his “web of more than 275 limited liability companies (LLC) to conduct a Ponzi scheme”.
He raised more than $1.22bn (£903m, €1bn) from over 8,400 investors nationwide.
Most of the LLCs were formed in the states of Delaware, Colorado and California where Shapiro and Woodbridge were based.
Investors were told they could expect returns of up to 15% interest after the money was loaned to commercial property developers.
The group avoided scrutiny be using insurance agents and unregistered investment advisers, incentivised by large commissions, instead of licenced/registered broker dealers to distribute the funds.
The SEC alleges that Shapiro “spent exorbitant amounts of investor money in alarming fashion”.
At least €21m was spent on items such as luxury cars, jewellery, country club memberships, fine wine and chartered private planes.
Investors are owed at least $961m. At least 2,600 of them collectively placed nearly $400m of their retirement savings in Shapiro’s Ponzi scheme.
On Wednesday, the SEC and an official creditors committee asked the court to appoint an independent trustee.
However, the company itself and the lawyers representing some of the investors argued for sticking with Larry Perkins, who was hired as a chief restructuring officer in October, the newswire reports.
The hearing was adjourned until 18 January, with judge Kevin Carey saying he had benefited from having an independent examiner in similar cases in the past.
“My concern was, if there were improprieties, I want to hear about them publicly rather than have them buried in settlements,” he said.