WASHINGTON - TWO New Yorkers were arrested on Wednesday for allegedly defrauding investors of US$668 million (S$1 billion) in a commodities trading scheme, the Justice Department said on Wednesday.

Paul Greenwood, 61, and Stephen Walsh, 64, were charged with conspiracy, security fraud and wire fraud after surrendering to the FBI.

They are alleged to have solicited investments over at least a 13 year period in an 'enhanced indexing' programme that they claimed had outperformed the market for 10 years.

Instead, according to a Justice Department statement, they misappropriated the funds and issued promissory notes to cover trading losses.

'Among other things, Greenwood is alleged to have used the funds to purchase expensive collectible items and horses, as well as for other personal expenditures,' the Justice Department said.

'Walsh is alleged to have misappropriated investor funds for himself, and to have made large cash payments to his ex-wife,' it said.

The two face 45 years in prison and up to US$5.5 million in fines if convicted. -- AFP

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