Financial Fraud Strikes Again

Haven't we had enough of financial scandals? Of course not, here we go again. This time it is with a boutique futures trading broker - Peregrine Financial Group, also known as P.F.G.. On July 9, 2012, the National Futures Association (NFA) - the industry wide, self-regulatory organization for the U.S. futures industry, made an inquiry with U.S. Bank and learned that out of the $225 million in customer segregated funds that P.F.G. had reported to the NFA as being on deposit at the Bank just days earlier, only approximately $5 million was actually on deposit. The NFA also learned that, although P.F.G. submitted confirmations that U.S. Bank account balances as of February 2010 and March 2011, were reported to be approximately $207 million and $218 million, respectively, P.F.G.'s actual balances were less than $10 million for each one of these months.

On top of the reported financial fraud, a day earlier, the chairman and chief executive, Russell Wasendorf Sr., tried to commit suicide outside of the firm’s offices in Cedar Falls, Iowa .The Federal Bureau of Investigation is investigating the matter, according to a spokeswoman for the Omaha office, Sandy Breault. Ms. Breault indicated that the Chicago office of the agency might also get involved.

The Commodity Futures Trading Commission (C.F.T.C.) is seeking a restraining order against P.F.G., to prevent the destruction of any information that may be needed in the course of the investigation. The C.F.T.C. is also asking a federal court to appoint a receiver for the firm and freeze its assets.

This feels a lot like a curtain call for MF Global, where $1.6 Billion is still missing. (refer to a prior article in this blog for more information about MF Global). Similarly in this case, as the complaint states: “P.F.G. and Wasendorf have used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds”. “The whereabouts of the funds is currently unknown".

Needless to say, the operations of the firm have been halted. Unfotunately, I am one the many victims. For two years, I was an active futures trader with the company which offered  proprietary trading platforms to small retail customers like myself with unique and robust features that were not available from other brokerage houses. Although it has been several years since I day traded, due to time constraints, I still kept a funded account with P.F.G.. I contacted the NFA today and registered my name as an account holder. I urge all others affected to do the same. It may not amount to much but at least it is better to take some kind of action and to make your voice heard.

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