LAWFUEL.COM – Legal Newswire Service –
LEV L. DASSIN, the Acting United States Attorney for
the Southern District of New York, and JOSEPH M. DEMAREST, JR.,
the Assistant Director-in-Charge of the Federal Bureau of
Investigation’s New York Field Division (“FBI”), announced today
that PAUL GREENWOOD, 61, of North Salem, New York, and STEPHEN
WALSH, 64, of Sands Point, New York, were arrested this morning
on conspiracy, securities fraud, and wire fraud charges.
According to the three-count Complaint unsealed today in
Manhattan federal court:
From at least 1996 through February 2009, GREENWOOD and
WALSH ran a fraudulent commodities trading and investment
advisory scheme using an entity they controlled called WG Trading
Investors. Through a marketer, GREENWOOD and WALSH solicited
investor funds on the understanding that they would invest the
funds in a program called “enhanced stock indexing,” which they
represented was a conservative trading strategy that had
outperformed the results of the S&P 500 Index for more than 10
years.
Several institutional investors – including charitable
and university foundations, retirement and pension plans, and
other institutions – invested more than $668 million through WG
Trading Investors, receiving in exchange promissory notes issued
by WG Trading Investors that the defendants represented would pay
interest at a rate equal to the investment returns earned by the
enhanced stock indexing strategy.
Contrary to their representations to their investors, GREENWOOD and WALSH
misappropriated the majority of the investor funds. Among other
things, GREENWOOOD used the funds to purchase expensive
collectible items, horses, and for other personal expenditures.
WALSH misappropriated investor funds for himself and to make
large cash payments to his ex-wife. Both GREENWOOD and WALSH
executed promissory notes in favor of WG Investors with respect
to the investor funds they misappropriated and to conceal trading
losses. These promissory notes totaled approximately $293
million for GREENWOOD and approximately $261 million for WALSH.
In February 2009, the National Futures Association
(“NFA”) conducted an audit of WG Investors and related entities.
In the audit, the NFA discovered that of approximately $812
million purportedly on the books of WG Investors, more than $794
million was booked as receivables due from GREENWOOD and WALSH
and investments in entities that they controlled.
GREENWOOD and WALSH surrendered this morning to the FBI
and are expected to be presented today before United States
Magistrate Judge DOUGLAS F. EATON in Manhattan federal court.
GREENWOOD and WALSH are each charged with one count of
conspiracy to commit securities fraud and wire fraud, one count
of securities fraud, and one count of wire fraud. The conspiracy
count carries a maximum sentence of 5 years in prison and a
maximum fine of $250,000, or twice the gross gain or loss from
the offense. The securities fraud count carries a maximum
sentence of 20 years in prison and a maximum fine of $5 million,
or twice the gross gain or loss from the offense. The wire fraud
count carries a maximum sentence of 20 years in prison and a
maximum fine of $250,000, or twice the gross gain or loss from
the offense.
Mr. DASSIN praised the investigative work of the FBI in
this case, and thanked the United States Securities and Exchange
Commission, the United States Commodity Futures Trading
Commission, and the NFA, for their assistance. He added that the
investigation is continuing.
Assistant United States Attorneys JOHN J. O’DONNELL,
JESSICA A. ROTH, and AMY LESTER are in charge of the prosecution.
The charges contained in the Complaint are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
09-041 ###
