Two traders arrested over alleged $1.3 billion scam

The FBI said Wednesday the operators of a Connecticut-based company have been arrested in New York on securities fraud charges. Paul Greenwood and Stephen Walsh, principals of WG Trading Company LP, were awaiting a federal court appearance in Manhattan. Earlier this month, a regulatory agency for the U.S. futures industry suspended Greenwood and Walsh, accusing them of refusing to answer questions about the transfer of $350 million to another fund. The Commodity Futures Trading Commission today charged Mr. Walsh of Sands Point, N.Y., and Paul Greenwood of North Salem, N.Y., with misappropriating at least $553 million from commodity pool participants. According to a relase from the CFTC, the complaint alleges that, from at least 1996 to the present, Mr. Walsh and Mr. Greenwood fraudulently solicited approximately $1.3 billion from individuals and entities through Westridge Capital Management, WG Trading Investors, LP, and other entities. WG Trading and Westridge Capital Management Inc., based in Santa Barbara, Calif., are described in court papers as one group with common ownership. On Friday, the University of Pittsburgh and Carnegie Mellon University sued Westridge, Mr. Greenwood and Mr. Walsh, seeking the immediate return of more than $114 million they invested.