A federal court in New York has entered a consent order of permanent injunction and equitable relief against Paul Greenwood of North Salem, New York.
The US Commodity Futures Trading Commission charged Greenwood with operating a USD1.3bn investment scam in which he and co-defendant Stephen Walsh, of Sands Point, New York, misappropriated at least USD553m from commodity pool participants in connection with entities they owned and controlled, such as Westridge Capital Management, WG Trading Investors, and WGIA.
The consent order, entered on 28 July 2010 by the US District Court for the Southern District of New York, permanently bars Greenwood from trading commodity futures and options contracts and CFTC-regulated foreign currency contracts.
Greenwood also is permanently prohibited from soliciting funds for such trading, registering with the CFTC and acting as a principal, agent or employee of a CFTC registrant.
The order also requires Greenwood to disgorge ill-gotten gains to defrauded pool participants and to pay a civil monetary penalty. The CFTC and Greenwood or the court will determine the specific amounts of disgorgement and the civil monetary penalty at a later date.
The order finds that, from at least 1996 to the present, Greenwood fraudulently solicited approximately USD7.6bn from various entities through Westridge Capital Management and WGIA. Defrauded pool participants include institutional investors such as pension and retirement plans and charitable and university foundations.
According to the order, Greenwood defrauded victims by falsely representing that their funds would be traded by means of an investment strategy called equity index arbitrage, which involves buying and simultaneously selling through futures the stocks of a well-known equity index, such as the Standard and Poor’s 500 Index. Instead, the order finds, pool participants’ funds were transferred to another entity from which Greenwood siphoned funds.
The consent order finds that, to cover-up the misappropriation of pool participants’ funds, Greenwood manufactured promissory notes to create the appearance that pool participants’ funds had been loaned to him. Greenwood and others caused companies that he ran to divert approximately USD80m to Greenwood for his benefit, according to the order.
Litigation is pending against other defendants and relief defendants in this action. Efforts to return funds to pool participants are ongoing.
On 28 July 2010, Greenwood entered a guilty plea in the US District Court for the Southern District of New York in a companion criminal action. The Securities and Exchange Commission also filed an action against Greenwood, and the court entered a consent order there as well.
