Bloomberg News

Peregrine Financial Allegedly Has $200 Million Shortfall

July 10, 2012

Peregrine Financial Group Inc., a futures brokerage, has a customer fund shortfall of at least $200 million, the U.S. Commodity Futures Trading Commission claimed in a complaint filed in federal court.

“The whereabouts of the funds is currently unknown,” the regulator alleged in its filing today at the U.S. courthouse in Chicago. Also named as a defendant in the CFTC filing is firm founder Russell Wasendorf Sr., who it said attempted suicide on July 9 outside the firm’s Cedar Falls, Iowa, offices and is now comatose.

The regulator is seeking a court order freezing the firm’s assets and the appointment of a receiver, as well as monetary relief including fines and restitution.

The U.S. Federal Bureau of Investigation is also participating in the federal probe, said Sandy Breault, a spokeswoman for the agency’s Omaha office. “We are currently reviewing the facts of the situation,” she said, declining to elaborate.

The firm yesterday told its customers that it was being probed for “accounting irregularities.” Patricia Campbell, a firm spokeswoman, didn’t immediately reply to voice- or e-mail messages seeking comment on the CFTC allegations.

The National Futures Association, an industry self- regulator yesterday said Peregrine had reported it held about $400 million in customer-segregated funds as of June 29, of which $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 $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 case is U.S. Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-5383, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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