Wednesday, February 25, 2009

Yet Another Alleged Investment Fraud Scheme

Two New York investment managers have been arrested on charges that they bulked customers out of hundreds of millions of dollars.

Federal prosecutors identify the duo as Paul Greenwood, 61, of North Salem, NY and Stephen Walsh, 64, of Sands Point, NY. They were arrested this morning on conspiracy, securities fraud and wire fraud charges.

A three-count complaint unsealed today in Manhattan federal court charges that 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 allegedly solicited investor funds on the understanding that they would invest the money 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 others – invested more than $668 million through WG Trading Investors, receiving in exchange promissory notes that, it is charged, the defendants represented would pay interest at a rate equal to the investment returns earned by the enhanced stock indexing strategy.

Greenwood and Walsh are alleged to have misappropriated the majority of the investor funds. Among other things, Greenwood is alleged to have used the funds to purchase expensive collectible items and horses, as well as for other personal expenditures. Walsh is alleged to have misappropriated investor funds for himself, and to have made large cash payments to his ex-wife.

Prosecutors say the promissory notes totaled approximately $293 million for Greenwood and approximately $261 million for Walsh.

An audit of the company earlier this month by the National Futures Association concluded 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. The two turned themselves into the FBI this morning. They 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.

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1 comment:

Anonymous said...

I am sure that all sorts of things will be coming out of the woodwork now that could have gone on for years more. It is becoming a time of belt tightening and people are becoming more critical of investment opportunities to the extent they will examine them with a fine tooth comb.