Peregrine Financial Group (PFGBest) filed for Chapter 7 bankruptcy protection on Tuesday night as disturbing details of the financially troubled firm and those charged with overseeing it have been revealed.
Reuters is reporting that Russell Wasendorf Sr., owner and chairman of PFG intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, citing sources close to the situation.
According to the report Wasendorf intercepted documents after they were mailed by the National Futures Association (NFA) to U.S. Bank, where PFGBest had said it had more than $225 million on deposit. Wasendorf then forged documents and returned them to the NFA showing his firm was in compliance.
Reuters reports that Wasendorf had set up a post office box in Cedar Falls, Iowa. It was to that post office box that NFA sent the documents, which were addressed to the bank.
According to the NFA’s Member Responsibility Action (MRA) it learned earlier this week that such documents may have been forged.
It also pointed out that that U.S. Bank account balances were off by up to $200 million as far back as February 2010.
According to the NFA, PFG filed daily electronic segregated funds report. The NFA also conducts annual audits for firms it serves as its Designated Self-Regulatory Organization. It is unclear why the large discrepancies in what was reported and the actual balances in the U.S. Bank account from as far back as February 2010 were not discovered in the annual audits.
An NFA spokesman stated that NFA does not comment on active investigations but notes that while FCMs file daily segregated account figures electronically, during an audit, bank confirmation of segregated fund accounts has traditionally been done through the mail.
Attain Capital Management, a customer of PFG, wrote in a blog yesterday, “MF Global had us angry, but this time, it’s personal. Our clients have money with PFGBest. We have money with PFGBest. We were misled by senior leadership. We were let down by regulators. We were failed by our government."
The Chapter 7 filing shows that Wasendorf signed over power of attorney to his son Russell Wasendorf Jr. on July 3. Wasendorf Jr. is listed as president and COO and the only other member of PFG’s board of directors, along with his father. The filing lists estimated assets at somewhere between $500,000,001 and $1 billion. It lists estimated liabilities of between $100,000,001 and $500 million, showing it has more assets than liabilities.
The police report filed regarding Wasendorf Sr’s suicide attempt stated a note was found on the scene indicating that account discrepancies at PFG may have been behind the suicide attempt.
A report sent out to PFG customers on Wednesday stated: “PFGBEST's clearing FCM continues to liquidate open positions. We are still processing for the trade date of Tuesday, July 10, and will send July 10 statements out as soon as processing is complete. We will update you as any new procedures are stipulated and with any further information as it becomes available.”