Peregrine claimed it was holding $220 million in client funds when it actually had just $5.1 million, regulators say.
Looks like MF Global may not be the only firm capable of losing hundreds of millions of dollars in client money.
Regulators are going after a Chicago-based a futures brokerage saying it engaged in fraud, misused client money, violated customer fund segregation law and made false statements about its finances.
The U.S. Commodity Futures Trading Commission filed a lawsuit against Peregrine Financial Group for stating that it held $220 million in customer funds when it was actually holding just $5.1 million. The CFTC says the false information was made to the National Futures Association (NFA), a self-regulatory organization responsible for monitoring and auditing the firm for compliance with the minimum financial and related reporting requirements.
A phone call and e-mail to Peregrine was not returned.
One client of Peregrine calls the ordeal “nauseating and infuriating.” In a public letter, Attain Capital, which also had money with MF Global, says it was misled by Peregrine’s senior leadership, let down by regulators and failed by the government.
The lawsuit comes a day after the NFA hit Peregrine Financial Group with its own enforcement action which prohibits the firm from soliciting or accepting any additional customer accounts or customer funds, accepting or placing trades for any customer accounts except for the liquidation of existing customer positions and from distributing, disbursing or transferring any funds, including to existing customers, without the prior approval of NFA–in essence shutting it down.
Much like the MF Global case (where $1.6 billion is still missing) the CEO is at the center of Peregrine’s missing money ordeal. When MFGlobal announced its bankruptcy back in October the heat was on Jon Corzine who ended up resigning and then testifying before Congress members about the missing money.
At Peregrine the CFTC is holding CEO Russell R. Wasendorf responsible naming him as defendant in the suit. “From at least February 2010 through the present, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations. The Complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges,” the agency said today.
The CFTC says Wasendorf attempted to commit suicide yesterday, July 9, 2012. “In the aftermath of that incident, the staff of the NFA received information that Wasendorf may have falsified certain bank records,” it added.
Attain Capital says in its letter, “There was no misunderstanding. Fraud was committed. PFGBest had submitted false confirmations of account balances. And segregated funds- ours and that of our clients- was missing…And all of this a mere months after Wasendorf, Jr. promised the world that PFGBest was no MF Global.”