Ex Compliance Officer Avoids Prison for $554 Million Fraud Scheme

Jan 13 2015 | 8:04am ET

The former chief compliance officer of WG Trading Company will avoid a prison sentence after cooperating in a case against the firm’s two partners over a $554 million fraud scheme.

According to federal prosecutors, Deborah Duffy provided critical evidence implicating Paul Greenwood and Steven Walsh in a wild scheme to steal from their institutional clients. Greenwood and Walsh used the firm’s commodity-trading practice to steal millions and purchase horse farms, collectible teddy bears, and cars.

For her 2009 guilty plea to money laundering, securities fraud, and conspiracy and cooperation with authorities, Duffy received one year of probation. She will also forfeit $131,000 for her role in authorizing the transfer of more than $100 million.

Greenwald, however, pled guilty to charges and received a 10-year sentence, while Walsh received 20 years from U.S. District Judge Miriam Cedarbaum.

The fraud scheme hit investors ranging from colleges, pension funds and charities.

The clients were allegedly convinced that their funds were used in a strategy called “equity index arbitrage.” The partners told clients the strategy involved buying and simultaneously selling, through futures, the stocks of an equity index.

Instead, the money funded the private lives of Greenwood and Walsh. The partners did occasionally used the money to meet client redemption requests. Prosecutors also alleged that Duffy had created fraudulent client account statements that showed fake returns.

Greenwood, a former owner of the NHL’s New York Islanders, pled guilty to the scheme in 2010 and agreed to cooperate with prosecutors. Walsh, meanwhile, denied knowledge of the scheme that ran from 1996 to 2009. He finally admitted to his role in the scheme in April 2014.
 
According to reports, roughly 94% of investor claims against the firm have been recovered.


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