SEC, CFTC Claw Back over $1 Billion in WG Trading Scam

US regulators today said that the receiver for the long-running Ponzi scheme WG Trading Co. has begun the final distribution to investors who, upon completion of this scheme, will retrieve 100% of their net principal investments.

Over $1 billion would have been returned since the case was brought by the CFTC in 2009. Through its partner and chief money manager, WG Trading operated commodities-trading and investment-advisory business that actually swindled investors out of more than $1.3 billion.

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For two decades, Paul Greenwood and Stephen Walsh misappropriated tens of millions of dollars from their investment clients and lied to cover up the losses. Prosecutors said the pair lured a host of deep-pocketed investors, including public pension funds and university foundations.

The Madoff-style scheme also scammed charities and other investors from 1996 to 2009, to fund Greenwood and Walsh lavish lifestyles, speculate in real estate and finance other businesses.

Greenwood, WG’s former general partner, pleaded guilty and was sentenced to 10 years, later reduced to five. Walsh, once a co-owner of New York Islanders hockey team, was sentenced to 20 years but a federal judge lopped more than 15 years off his securities fraud sentence.

The receiver auctioned the fraudsters’ collectibles

Another fund manager who stole more than $20 million was sentenced to three years in prison, but then helped prosecutors build fraud cases against his ex-colleagues.

The assets marshalled in this case include over $88 million in funds clawed back from fully redeemed customers. The receiver already auctioned the fraudsters’ collectibles, including a $14 million horse farm in North Salem, a collection of antique teddy bears sold at auction at Christie’s for over $3.7 million, and an estate in Sands Point, NY.

The court-appointed receiver in this matter, Robb Evans & Associates, LLC, has made four previous distributions to injured investors: in December 2010, in April 2011, in April 2013, and in October 2015.

“This case serves as yet another example of the value of working with our law enforcement and regulatory partners to preserve the integrity of our markets and protect customers. In the end, the funds marshalled by the court-appointed receiver were enough to make the victims of this fraud whole and we are pleased to join the SEC in announcing this positive outcome,” said CFTC Division of Enforcement Director James McDonald.

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