Peregrine investigated over missing money after suicide attempt
Source: BI-ME with Bloomberg , Author: Posted by BI-ME staff
Posted: Tue July 10, 2012 6:35 pm

INTERNATIONAL. Peregrine Financial Group Inc., a futures brokerage with US$396 million in customer funds, is being investigated in the US for alleged missing money as founder Russell Wasendorf Sr. unsuccessfully attempted suicide.

“Some accounting irregularities are being investigated regarding company accounts,” the brokerage said in an e-mail to customers yesterday, a copy of which was obtained by Bloomberg News and confirmed by Patricia Campbell, a company spokeswoman in Chicago. Wasendorf owns the entire firm, according to the e- mail. The National Futures Association “and other officials” have frozen all customer money, the e-mail said.

The NFA, the self-regulator for futures brokerages, said in a notice yesterday that Peregrine reported it had about US$400 million in customer-segregated funds on or about June 29, of which US$225 million was on deposit at U.S. Bank. The regulator was then made aware that its chairman “may have falsified bank records” and after finding only US$5 million was on deposit.

The NFA has prohibited Peregrine from soliciting or accepting new customer accounts or funds, placing trades for customers except to liquidate positions or distributing customer money.

The investigation also includes officials at the Commodity Futures Trading Commission and local authorities, according to a person familiar with the matter who asked not to be named because the details are private. Steve Adamske, a CFTC spokesman, said the agency doesn’t comment on potential investigations. 

The brokerage offered futures, cash, foreign exchange and options on futures trading.

Peregrine was sued by a court-appointed receiver in Minnesota earlier this year for allegedly ignoring red flags that Peregrine customer Trevor Cook was operating a Ponzi scheme, according to a Feb. 1 lawsuit filed in the United States District Court in Minneapolis. Cook was sentenced to 25 years in prison for operating “one of the largest Ponzi schemes in Minnesota history,” receiver R.J. Zayed said in the complaint.

Supposedly profitable investments by Cook and others with Peregrine “ultimately lost more than US$30 million” in accounts that Peregrine “permitted Cook to open, maintain and manage in the face of overwhelming red flags of fraud or insolvency,” the suit said.

Cook and others “transferred tens of millions of dollars, totaling approximately US$48 million,” to Peregrine accounts from their customers.

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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