(HedgeCo.Net) The Commodity Futures Trading Commission has announced the successful conclusion of the receivership in CFTC v. Walsh, et al., a $1.3 billion Ponzi scheme case the CFTC filed in 2009. On September 19, the U.S. District Court for the Southern District of New York approved the receiver’s final account and report, discharged the receiver, and accepted the receiver’s request to deposit the remaining receivership funds with the court.
During the receivership, over $1 billion was returned to investors in a commodity pool operated by defendants Paul Greenwood and Stephen Walsh, constituting 100% of all approved investor claims. The court-appointed receiver for this matter was Robb Evans & Associates LLC.
The order follows the entry of final judgments against Walsh and Greenwood on November 13, 2019 and November 19, 2019, respectively. The assets marshalled in this case include over $88 million in funds clawed back from fully redeemed investors, a $14 million horse farm in North Salem, N.Y., a collection of antique teddy bears sold at auction at Christie’s for over $3.7 million, and an estate in Sands Point, N.Y.
“As this long-standing litigation demonstrates, where customers are egregiously harmed by greedy fraudsters who misappropriate funds entrusted to them, the CFTC is resolute in its commitment to protecting customers and achieving justice,” said Acting Director of Enforcement Gretchen Lowe. “I commend our dedicated staff, the court-appointed receiver and our cooperative enforcement partners for their hard and sustained work to conclude this matter. The cooperative enforcement effort in this case, resulting in restitution to all customers of over 100% of their initial investment totaling over $1 billion, demonstrates the high degree of success that comes from working with fellow regulators, self-regulatory organizations, and criminal authorities.”
Case Background
The CFTC complaint, filed in the U.S. District Court for the Southern District of New York on February 25, 2009, charged Greenwood and Walsh, both residents of New York, with operating a Ponzi scheme that misappropriated at least $553 million from commodity pool participants in connection with entities they owned and controlled, such as Westridge Capital Management, Inc., WG Trading Investors, LP, and WGIA, LLC. The Securities and Exchange Commission (SEC) also filed a civil action in a related matter. [See SEC v. WG Trading Investors, L.P., et al., No. 09-cv-1750 (S.D.N.Y.)]
A prior order entered by the court approved a pro rata distribution plan recommended by both the CFTC and SEC, and proposed by the receiver. Under the court-approved plan, the receiver made an initial distribution of approximately $792 million to investors, mostly institutions, such as state and county pension funds, private pension funds, and university foundations. Three additional court-approved partial distributions have since taken place, and a final distribution completed the process resulting in victims of the fraudulent scheme obtaining a return of all of their approved claims.
Both Greenwood and Walsh eventually pleaded guilty to criminal violations in the related criminal action, agreed to consent forfeiture judgments of approximately $85 million and $50 million, respectively, and served approximately five years and four years in federal prison, respectively. [See United States v. Greenwood et al., No. 1:09-cr-722 (S.D.N.Y.)] In the civil proceedings filed by the CFTC and SEC, both Greenwood and Walsh ultimately agreed to consent orders of permanent injunction that enjoined them from any ongoing violations and further imposed permanent trading and registration bans.
