Paul Greenwood To Forfeit $331 Million; Pleads Guilty In Massive Fraud Scheme That Put Public Pension Funds At Risk While He Collected Teddy Bears

Perhaps he’ll be remembered best for his collection of Steiff teddy bears paid for by investors, but there now are other reasons to remember Paul Greenwood.

Greenwood has pleaded guilty to swindling institutional investors, universities and pension funds in a Ponzi-like scheme. He is believed to be cooperating with prosecutors in the ongoing probe of WG Trading Co. — and has agreed to forfeit “at least” $331 million.

Prosecutors called the sum “the amount of funds that Greenwood and others personally misappropriated and diverted . . .” Greenwood, who potentially faces decades in prison, pleaded guilty to a total of six charges: conspiracy, securities fraud, commodities fraud, wire fraud (two counts), and money-laundering.

His business partner, Stephen Walsh, also is charged in the criminal case, which was brought by the FBI. The SEC and the CFTC filed civil actions.

The CFTC described the case as a “$1.3 billion investment scam.”

“Greenwood and others caused companies that he ran to divert approximately $80 million to Greenwood for his benefit,” the agency said.

Greenwood, who claimed to own 1,350 collectible teddy bears, is the former town supervisor of North Salem, N.Y.  The CFTC said he and Walsh “misappropriated at least $553 million from commodity pool participants.”

For its part, the SEC called the scheme “brazen.”

“[S]ince at least 1996, Greenwood and Walsh promised investors that their money would be invested in a stock index arbitrage strategy,” the SEC said. “Instead, Greenwood and Walsh essentially treated their clients’ investments as their personal piggy bank to purchase multi-million dollar homes, a horse farm and horses, luxury cars, and rare collectibles such as Steiff teddy bears.”

Federal prosecutors said Greenwood and others told investors they employed a strategy known as “equity index arbitrage,” defining it as “conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years.”