U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21144 / July 21, 2009
SEC v. Deborah Duffy, Civil Action No. 09-6458 (SDNY)
SEC Charges Chief Compliance Officer in $554 Million Investment Fraud
On July 21, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Southern District of New York against the former Chief Compliance Officer of WG Trading Company Limited Partnership (WGTC), a Greenwich, Connecticut based broker-dealer, for assisting the principals of WGTC orchestrate a $554 million investment fraud. In February 2009, the Commission filed an emergency action to halt the investment fraud at WGTC and obtained preliminary injunctions, asset freezes and other relief against the WGTC principals who were the primary perpetrators of the fraud, Paul Greenwood and Stephen Walsh.
The defendant named in the Commission's complaint filed today is:
Deborah Duffy, age 53, resides in Mahwah, New Jersey. She was until February 2009, the Chief Compliance Officer of WGTC, a broker dealer registered with the Commission. Duffy was also a registered representative associated with WGTC and held Series 7, 24 and 63 licenses.
The Commission's complaint specifically alleges as follows:
From at least 1996 to February 2009, Duffy aided and abetted Greenwood and Walsh's fraudulent investment scheme. Greenwood and Walsh promised investors, which included several pension funds and educational institutions and endowments, that their money would be invested in a stock index arbitrage trading strategy at WGTC. Instead of investing the money as promised, Greenwood and Walsh treated the investors' account as their personal piggy-bank to pay for their lavish lifestyles, which included multi-million dollar homes, luxury cars, horses, and rare collectible items. The Commission's complaint alleges that Duffy assisted in the fraud by knowingly wiring investor funds to Greenwood and Walsh's personal bank accounts and by creating phony "promissory notes" to cover up the fraud. Duffy knew that the funds she was wiring out of the investors' account were being used by Greenwood and Walsh for their personal expenses and were not being invested at WGTC. Duffy also misappropriated as much as $292,000 of investors' money for herself by wiring investor funds to accounts that she controlled or to third-parties to pay for personal items she purchased.
The Commission's complaint charges Duffy with aiding and abetting violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint seeks a final judgment permanently enjoining Duffy from violating or aiding and abetting future violations of the federal securities laws and ordering her to disgorge her ill-gotten gains with prejudgment interest and to pay a civil monetary penalty.
Duffy pled guilty today to related criminal charges brought by the United States Attorney's Office for the Southern District of New York (USAO) involving the same conduct alleged in the Commission's complaint.
The Commission acknowledges the assistance and cooperation of the USAO, the Federal Bureau of Investigation and the Commodity Futures Trading Commission. The Commission's investigation is ongoing.
For additional information see: Litigation Release No. 20912 (February 25, 2009)
