According to a three-count complaint unsealed today in Manhattan federal court, from at least 1996 through February 2009, [Paul Greenwood, 61, of North Salem, N.Y., and Stephen Walsh, 64, of Sands Point, N.Y.] 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 others - 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 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. ...
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.
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The complaint alleges that since the summer of 2007, $1.3 billion in illegal wire transfers were made to bank accounts held by Greenwood and Walsh's wife. ...
The arrests come less than a week after the University of Pittsburgh and Carnegie Mellon University sued Westridge, Greenwood and Walsh, seeking the immediate return of more than $114 million they invested.more » « less