BBC News is reporting that “U.S. futures broker Peregrine Financial Group (PFG), which has been accused of fraud, has filed for Chapter 7 bankruptcy, meaning it will be liquidated.” The Commodities Futures Trading Commission (CFTC) has accused PFG of defrauding customers and misleading regulators in misusing clients’ funds to hide a $200 million shortfall. Its accounts were frozen earlier this week following the attempted suicide of Russell Wasendorf Sr., its founder. The 64-year-old is reportedly in a coma at a University of Iowa hospital.
The Wall Street Journal notes that Cedar Falls police found Wasendorf in his automobile Monday morning outside the company’s headquarters, with a hose running from the car’s tailpipe. The CFTC filed a lawsuit in federal court in Chicago accusing Peregrine Financial and Wasendorf of fraud, customer-funds violations, and making false statements. According to the Journal, “the CFTC said shortfalls may have been present since at least February 2010. A spokeswoman for the FBI said it has also begun an investigation into the company, also known as PFGBest. Brokerage and retail customers had their accounts frozen as regulators began looking into the company’s books.”
Crain’s Chicago Business adds that “commodity trading firms with client accounts at Peregrine Financial Group Inc. reacted with frustration and anger this week on news of the possible shortfall in customer funds at the futures commission merchant and brokerage.” Commodity Customer Coalition co-founder John Roe estimates that at least 100 of the clients affected by the demise of MF Global were also impacted by this week’s freeze in assets at Peregrine. Typhon Capital Management LLC and Chicago-based commodity trading adviser Arctic Asset Management LLC were among firms that had millions of dollars in client money at both MF Global and PFGBest.