International Law

WG Trading Investors Investment Fraud

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From the SEC Press Release regarding the WG Trading fraud:

The Securities and Exchange Commission today took emergency action and obtained an asset freeze against two New York residents and their three affiliated entities, who orchestrated a brazen investment fraud involving the misappropriation of as much as $554 million in investor assets.

The SEC alleges that Paul Greenwood and Stephen Walsh promised investors that their money would be invested in a stock index arbitrage strategy. I

nstead, Greenwood and Walsh essentially treated their clients' investments as their personal piggy bank to purchase multi-million dollar homes, a horse farm and horses, luxury cars, and rare collectibles such as Steiff teddy bears.

The SEC has obtained an emergency court order freezing the assets of Greenwood and Walsh as well as their companies: WG Trading Investors, L.P. (WGTI), which is an unregistered investment vehicle; WG Trading Company, Limited Partnership (WGTC), which is a registered broker-dealer located in Greenwich, Conn.; and Westridge Capital Management, Inc. (Westridge), which is a registered investment adviser located in Santa Barbara, Calif.

According to the SEC's complaint, filed in federal court in Manhattan, the SEC alleges that Greenwood and Walsh have been orchestrating the fraudulent investment scheme through their affiliated entities since at least 1996.

The SEC alleges that they solicited a number of institutional investors, including educational institutions and public pension and retirement plans, by promising to invest their money in an "enhanced equity index" strategy that involves purchasing and selling equity index futures and engaging in equity index arbitrage trading.

However, Greenwood and Walsh have been misappropriating hundreds of millions of dollars of investor funds for their personal use instead of investing the money in the enhanced equity index strategy.

In fact, Greenwood and Walsh misappropriated as much as $554 million of the $667 million that Westridge clients invested in WGTI. Greenwood and Walsh have provided some of the investors' money to their spouse and ex-spouse, respectively, who are also named as relief defendants in the SEC's complaint.

Full post as published by Misleading Advertising Law on February 25, 2009 (boomark / email).