After years of concerns raised but never fully investigated by futures industry regulation, the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) took enforcement action July 9th against brokerage firm Peregrine Financial Group, also known as PFGBest. Peregrine founder Russell Wasendorf subsequently confessed to committing acts of embezzlement and fraud over the course of two decades, illegally acquiring over $100 million. Wasendorf was then arrested on charges of having lied to government regulators.
$215 million is believed to be missing from Peregrine’s pool of customer funds, with a recently forged bank statement claiming $221 million in company accounts with U.S. Bank, while the bank has Peregrine on file for only $6.3 million. Four regulatory actions have been against Peregrine since 1996 – with allegations including inaccurate accounting, insufficient capital, and problems with segregating customer money.
Wasendorf in writing confessed to having spent most of the funds embezzled over the course of his career, using the money to secure firm capital, purchase PFG’s corporate headquarters, and even pay regulatory fines and fees. In July, a half dozen customer claims on PFG were met with quotes of twenty-two to twenty-five cents on the dollar by CRT Capital Group, a limited liability company which deals in distressed debt.