The former wife of Stephen Walsh, the WG Trading Co. money manager indicted two years ago on charges of conspiring to defraud investors of $554 million, won dismissal of a U.S. freeze on her assets.
The U.S. Court of Appeals in New York today threw out the decision by a district court judge in Manhattan to grant preliminary injunctions to the Commodity Futures Trading Commission and the Securities and Exchange Commission, which placed a hold on most of Janet Schaberg’s assets.
Schaberg appealed the lower-court ruling, and the New York state Court of Appeals, in response to questions from the federal appeals judges, determined that fraud proceeds can be deemed marital property and may be “fair consideration” paid by a spouse under state law.
“Although that court’s answers do not definitely resolve whether Schaberg’s assets will prove subject to disgorgement, they do resolve this appeal,” the U.S. appeals panel wrote in today’s decision. The judges sent the ruling back to the district court to decide whether any of the assets can be restrained.
A July 2009 indictment accused Walsh and fellow WG Trading manager Paul Greenwood of conspiring to defraud investors in a scheme that lasted from 1996 until the pair was arrested in February 2009.
Greenwood pleaded guilty to charges including conspiracy and securities fraud in July 2010 and is cooperating with prosecutors in their case against Walsh, who has pleaded not guilty. No trial date has been set.
Schaberg was married to Walsh for more than two decades until the pair separated in 2004, according to today’s ruling. Walsh agreed to pay Schaberg $12.5 million in biannual installments through 2020 and allow her to keep about $5 million held in checking accounts.
Schaberg, who remarried in 2008 and adopted her current name, gave up her interest in a house in Port Washington, New York, while taking sole ownership of condominiums in New York City and Florida, the U.S. appeals panel said.
The appeal is Commodity Futures Trading Commission v. Walsh, 09-cv-3742, U.S. Court of Appeals for the Second Circuit (New York). The civil case is Commodity Futures Trading Commission v. Walsh, 09-cv-1749, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Greenwood, 09-cr-722, U.S. District Court, Southern District of New York (Manhattan).
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