As part of the notice placing PFGBest (PFG) in liquidation-only status, the National Futures Association (NFA) detailed that customer segregated funds at the futures commission merchant (FCM) may be underfunded by as much as $220 million.
According to the member responsibility action (MRA) notice, PFG was required to maintain segregated funds of approximately $400 million as of July 6. On June 29, PFG had reported to NFA that it had more than enough funds on deposit, of which more than $225 million was on deposit at U.S. Bank.
According to a complaint filed by the CFTC on Tuesday morning, Wasendorf controlled the account at U.S. Bank as one of its three signatories.
The notice goes on to say that on July 9, NFA received information that PFG’s chairman, Wasendorf, may have falsified bank records. After receiving this information, NFA made inquires to U.S. Bank and “learned that rather than the $225 million that PFG had reported as being on deposit at U.S. Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank.”
Further, in looking at previously reported balances at U.S. Bank, rather than the reported balances of $207 million and $218 million for February 2010 and March 2011, respectively, PFG’s actual balances at U.S. bank at those times were less than $10 million for each of those months.
Robb Ross, president of commodity trading advisor White Indian Trading, says he was informed by the NFA that all resting orders would be canceled. “At least the NFA learned something from MF Global,” Ross says. “MF Global didn’t let us liquidate.”
Ross referred to the fact that customers of MF Global were frozen out for a period of time following its bankruptcy. He is concerned that he could lose customers due to the possibility that customer funds were once again not being protected. “This is twice in nine months. How am I going to raise money if people lose faith in the industry,” Ross says.
One PFG customer we spoke with said that he saw a potential red flag back in June when a check from the firm did not clear. PFG indicated that it was simply a technical glitch and the check cleared a day later.
More information: Wasendorf hospitalized after suicide attempt (WCFCourier.com)