The U.S. Commodity Future Trading Commission says that hedge fund Paul Greenwood has been sentenced to ten years behind bars. Greenwood, who was the general partner of WG Trading Co., pleaded guilty to numerous criminal charges, including securities fraud, wire fraud, money laundering, commodities fraud, and conspiracy in 2010.
Greenwood and fellow WG Trading manager Steven Walsh were indicted on charges that accused them of conspiring to bilk investor of $554 million in an investment scam that U.S. prosecutors say ran from 1996 through 2009. Greenwood admitted to “sort of” operating a Ponzi scam and spending a minimum of $75 million of investors’ funds to pay for his passion for museum-grade teddy bears and other lavish spending. The scheme purportedly cost investors somewhere between $800 million to $900 million.
U.S. District Judge Miriam Goldman Cedarbaum, who sentenced Greenwood, told him to forfeit another $83.5 million. He has until February 9, 2015 to report to prison. Prosecutors told the judge that Greenwood helped the government with its case. He also assisted a court-appointed receivership in finding around $900 million, which is nearly 90% of investor claims. As part of his plea deal, Greenwood said he would forfeit at least $331 million to the government.
Greenwood and Walsh previously had minority ownership of the professional hockey team the New York Islanders. The ownership was just one example of investments the two men made that weren’t in line with the arbitrage strategy they presented to investors.
Walsh, who had pleaded guilty to securities fraud was recently sentenced to twenty years behind bars. He consented to forfeit over $50 million. Walsh admitted to giving false notes to investors and promising that their investments would be repaid plus interest.
The SEC sued both men and the CFTC also filed its own case. Greenwood settled the SEC’s case against him four years ago.
According to the Consent Orders submitted in the CFTC case, Greenwood and his co-defendant solicited over $7.6 billion from institutional investors via WG Trading Investors, LP, Westridge Capital Management, and other entities. Among those bilked were university foundations, charitable foundations, and retirement plans. Carnegie Mellon University, which invested nearly $50 million and University of Pittsburgh, which invested over $65 million, were among the alleged victims.
The defendants are accused of falsely portraying that pool participants’ funds would be used in a single investment strategy involving index arbitrage. Instead, the two of them siphoned the money. The CFTC said that Greenwood and the codefendant misappropriated $554 million in investor money, using more than $130 million for personal spending.
If you are an institutional investor or a high net worth investor and you suspect your losses may be due to securities fraud, please contact The SSEK Partners Group today. We have helped thousands of investors get their money back.
Paul Greenwood Sentenced to 10 Years in Federal Prison for Billion-Dollar Investment Scam, CFTC, December 4, 2014
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