Yet another fraud: $1.3 Billion, 2 arrested

Discussion in 'Wall St. News' started by crgarcia, Feb 25, 2009.

  1. 2 arrests in NY securities fraud case

    2 investors who managed millions for universities, charities arrested in NY fraud case

    NEW YORK (AP) -- The owners of an investment firm that managed hundreds of millions of dollars for universities and charities were arrested Wednesday by the FBI in the latest white-collar scandal to rock Wall Street.

    Paul Greenwood, also a horse breeder and elected official in suburban New York, and Stephen Walsh were awaiting an appearance in federal court in Manhattan to face securities and wire fraud charges alleging they raided funds of $1.3 billion to buy horses and cover other personal expenses. The names of their attorneys were not immediately available.

    Court papers identified Greenwood and Walsh as the owners of Greenwich, Conn.-based WG Trading Company LP and of Westridge Capital Management Inc., based in Santa Barbara, Calif. Their operation also had offices in Manhattan and Jersey City, N.J.

    The firms' clients included "charitable and university foundations, retirement and pension plans and other institutions," a criminal complaint said.

    The complaint alleges that since the summer of 2007, the illegal wire transfers were made to bank accounts held by Greenwood and Walsh's wife.

    It also cites an interview with an unidentified WG Trading employee who described being instructed to transfer funds to personal bank accounts.

    The employee claimed the money was used for "the purchase of expensive collectible items by Greenwood, the purchase of horses by Greenwood, transfer of cash to Walsh's then-wife and ... the purchase of an apartment for Walsh's ex-wife pursuant to a divorce settlement."

    The arrests add to a growing list of white-collar defendants facing charges in U.S. District Court in Manhattan, topped by the case of Bernard Madoff, who has pleaded not guilty to masterminding a $50 billion Ponzi scheme.

    Other cases include that of Florida hedge fund Arthur Nadel, accused of bilking investors of up to $350 million, and Mark Dreier, a prominent lawyer charged with stealing $400 million in a hedge fund scam. They also have pleaded not guilty.

    The criminal investigation of Greenwood and Walsh sprang from an audit launched earlier this month by the National Futures Association, a Chicago-based regulatory agency for the U.S. futures industry.

    The group suspended the pair after they refused to answer questions about a dubious series of loans between their various entities that involved more $500 million in transfers, NFA spokesman Larry Dyekman said Tuesday.

    "They wouldn't cooperate at all so we had to take action," Dyekman said.

    Last week, University of Pittsburgh and Carnegie Mellon University sued Westridge, Greenwood and Walsh, seeking the immediate return of more than $114 million they invested.

    Greenwood was elected last year as a supervisor in North Salem, N.Y., where press accounts say he raises horses on a 300-acre farm. He once owned Old Salem Farm, a 54-acre riding school and horse farm bought from Paul Newman and Joanne Woodward.

    The FBI made two more arrests Wednesday in separate investigations of securities fraud.

    James Nicholson, president and general partner of Westgate Capital, a New York City investment fund, and a trader, Mark Bloom, were awaiting appearances in federal court.
  2. And this schmuck too. I'm sure its a mere coincidence that he worked at the same firm as the schmucks above.

    LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the Federal Bureau of Investigation’s New York Field Division (“FBI”), announced today that MARK BLOOM, 57, of New York, New York, was arrested this morning by special agents of the FBI on securities fraud and wire fraud charges. According to the two-count Complaint unsealed today in Manhattan federal court:

    From at least July 2001 through February 2009, MARK BLOOM defrauded investors in North Hills Fund (“NHF”), an investment partnership he managed. In a Private Placement

    Memorandum and in marketing materials he provided to investors, BLOOM represented that the North Hills Fund was a "fund of funds" which would invest in a diversified portfolio of hedge funds in order to lessen the risk of the stock market and achieve a return of approximately 12 percent.

    Contrary to his representations to investors that North Hills Fund’s assets would be diversified among hedge funds, BLOOM, starting in about February 2004, concentrated at least 50 percent of North Hills Fund’s capital in a commodities trading pool known as the Philadelphia Alternative Asset Fund ("PAAF"), without disclosing NHF's investment in PAAF to North Hills Fund’s investors until about July 2005.

    BLOOM also failed to disclose to NHF investors that he had a “referral agreement” with PAAF's operator pursuant to which he received commissions for steering funds into PAAF and other funds managed by its operator. BLOOM received approximately $1.6 million in undisclosed commissions from PAAF's operator during 2004 and 2005.

    Additionally, BLOOM misappropriated millions of dollars from NHF, which he used for personal expenditures, including the purchase of a luxury apartment in Manhattan.

    In November 2008, BLOOM admitted to certain North Hills Fund investors demanding to know what had happened to their investments that he had borrowed approximately $10 million from the fund, which he had used to buy the apartment, among other things.

    At the time BLOOM formed the North Hills Fund, he was employed at WG Trading Company, a broker dealer.

    BLOOM is expected to be presented today before United States Magistrate Judge DOUGLAS F. EATON in Manhattan federal court.

    BLOOM is charged with one count of securities fraud and one count of wire fraud. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.

    Mr. DASSIN praised the investigative work of the FBI in this case, and thanked the United States Securities and Exchange Commission and the United States Commodity Futures Trading Commission for their assistance. He added that the investigation is continuing.

    Assistant United States Attorneys JESSICA A. ROTH, JOHN J. O’DONNELL, and AMY LESTER are in charge of the prosecution.

    The charges contained in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
  3. tradersboredom

    tradersboredom Guest

    one reason to regulate hedge funds.

    monthly audits on bank accounts and cash on hand.

    of course hedge funds have been lobbying congress not to regulate their racket.

  4. I know most of you are way smarter than me, so I'm hoping you can help.

    why the f$^k isn't there the death penalty for this level of fraud?

    thanks in advance.

    Past or Prologue
  5. Illum


    Wall Street killed the biggest golden calf in history. Retirement accounts of the baby boomers. They will exit and not come back. Soon they will be trading against only themselves. Old dirty tricks wont work vs each other.
  6. the more I see of these stories, the more I will NEVER let anyone else "manage" my money. Give me several futures brokers (with segregated funds) and let me do my own.

    Imagine, that people who just put their money in a week ago, may never see their money again. That is also why I will not trade forex. Segregate funds; boy. No bankruptcy making my money disappear.
  7. Yes, well. I've been calling them hedge fund scum for many moons. Why would you leave your money with scum?
  8. Another scumbag fraudster caught.

    The Securities and Exchange Commission today charged a Pearl River, N.Y., investment management firm and its principal for operating a large-scale scheme that defrauded hundreds of investors of millions of dollars by providing them with misleading marketing materials that significantly overstated investment returns and by misrepresenting the value of the assets under management.

    The SEC is seeking a court order to freeze the assets of Westgate Capital Management, LLC and its managing member, James M. Nicholson. The SEC alleges that they solicited investors with false claims of an almost unbroken eight-year string of monthly investment successes. Neither the firm nor its principal is registered with the SEC. The U.S. Attorney's Office for the Southern District of New York today announced parallel criminal charges against Nicholson.

    The SEC's complaint, filed in federal district court in Manhattan, alleges that since at least January 2008, Nicholson and Westgate defrauded current and prospective investors in 11 hedge funds they managed by misrepresenting the value of the hedge funds to investors, and soliciting new investors with sales materials that claimed a nearly impossible record of investment success. According to the SEC's complaint, at least one Westgate fund claimed positive returns in 98 of 99 consecutive months.

    The SEC alleges Nicholson sought to further his fraud by creating a fictitious accounting firm and providing some of his investors with bogus audited financial statements. Nicholson apparently concocted this imposter firm under the name of an actual accountant while using his own telephone number and driver's license to set up a "virtual office."

    According to the SEC's complaint, by late 2008, the funds had sustained such losses that Nicholson and Westgate could no longer honor redemption requests. They hid the losses from investors with misrepresentations and false sales brochures. Nicholson further attempted to hide losses in the Westgate fund family by other devices. He closed one fund that was heavily invested in the bankrupt Lehman Brothers and folded its assets into another Westgate fund. He issued bad checks to some investors seeking to cash out, and ultimately suspended all investor redemptions due to what he called investors' "irrational behavior."

    The SEC alleges that Westgate and Nicholson have violated the antifraud provisions of the federal securities laws. The SEC is seeking an emergency court order freezing the assets of Nicholson, Westgate, and the hedge funds; preventing the destruction of documents; granting expedited discovery; and requiring Nicholson and Westgate to provide accountings. Additionally, the SEC seeks preliminary and permanent injunctions, disgorgement, and financial penalties against both defendants.

    Nicholson was barred from the brokerage industry in 2001 for failing to reply or supplying false information in response to inquiries from the National Association of Securities Dealers (now known as the Financial Industry Regulatory Authority).

    The SEC appreciates the assistance of the U.S. Attorney for the Southern District of New York and the Rockland County, N.Y., District Attorney in this matter.
  9. Don't hate the game hate the players. Hedge fund investors are rich and technically *CAN* afford to loose money its why they are allowed to invest with hedge funds. If a client can't do enough do diligence to know if a fund is scamming him or not then he shouldn't be investing his cash in these high risk / high reward businesses.

    Big fucking deal life moves on.
  10. trendy


    And him to the Rogues Gallery

    The Securities and Exchange Commission filed a Complaint on February 26, 2009, in the United States District Court for the District of Idaho, alleging that Daren L. Palmer ("Palmer"), a resident of Idaho Falls, Idaho, and his investment business Trigon Group, Inc. ("Trigon"), a Nevada corporation, raised at least $40 million as part of a Ponzi scheme that has defrauded at least 55 investors. According to the Commission's Complaint, from at least 1996 until October 2008, Palmer and Trigon defrauded investors by representing that invested funds would be used in a riskless trading program that earned annual returns of 20 percent or more. The Complaint alleges that Palmer and Trigon sold securities in the form of promissory notes and investment contracts in unregistered transactions, and told investors that their principal would be invested in indexes, S&P 500 options or futures, currency futures and stocks in a way that would generate high returns with no risk. The Complaint alleges that, instead, Palmer and Trigon were using funds put into the program by later investors to pay fictitious returns to earlier investors in a classic Ponzi scheme. The Commission's Complaint further alleges that Palmer used investor funds to build a partially completed $12 million home in Idaho Falls, Idaho, to purchase snowmobiles, to pay himself compensation of $25,000 to $35,000 a month, and for other personal expenses. The Complaint also alleges that while Palmer told investors he was licensed to sell securities, he has never been licensed to sell securities and that neither Palmer nor Trigon is registered with the Commission in any capacity.

    The Commission asked the court to order a preliminary injunction enjoining Palmer and Trigon from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and enjoining Palmer from future violations of Section 15(a) of the Exchange Act. In addition, on February 26, 2009, the court signed an order freezing all assets of Palmer and Trigon and appointing a receiver in the matter.

    The Commission acknowledges the assistance of the U.S. Commodities Futures Trading Commission, the Federal Bureau of Investigation, and the Idaho Department of Finance in bringing this action.
    #10     Feb 28, 2009