Peregrine Financial Group Inc.’s liquidating trustee can consider bulk offers for futures client accounts from other commodities firms, a U.S. bankruptcy judge said.
While Judge Carol A. Doyle in Chicago today agreed with Trustee Ira Bodenstein’s position that futures client funds may most efficiently be distributed through the sale of accounts to another firm, she deferred ruling on his request for approval of a proposed interim distribution of $123 million.
“We understand how important it is to the customers to get their money back,” Bodenstein’s lawyer, Robert Fishman, said today while arguing in support of that plan.
The U.S. Commodity Futures Trading Commission on Sept. 9 objected to the payout proposal under which the trustee would hold back about $58 million in futures client funds as a hedge against firm account records being falsified or incorrect.
Peregrine filed for bankruptcy court liquidation on July 10 after a National Futures Association audit revealed that about $200 million in client funds reportedly on deposit with the firm’s bank were unaccounted for.
The CFTC then sued the Cedar Falls, Iowa-based firm and founder Russell Wasendorf Sr., accusing them of misappropriating that money. Wasendorf has since been charged with 31 counts of making false statements to the regulators.
While he entered a plea of not guilty on Aug. 17, a U.S. Federal Bureau of Investigation agent testifying at a Wasendorf bail hearing in Cedar Rapids federal court yesterday said the founder has signed a plea agreement admitting to mail fraud, embezzlement and the making of false statements.
No change of plea date has been set nor has U.S. Magistrate Judge Jon Scoles ruled on Wasendorf’s bail request.
CFTC attorney Anne Stukes argued in her Sept. 9 filing and in court today that additional testing and analysis of the accuracy of Peregrine’s records was needed.
“Distribution should be made as soon as possible and as soon as practicable,” Stukes said today.
Fishman told the court that while the trustee agreed in principal with the CFTC position and that many of the agency’s recommendations had been implemented, some were simply not cost-effective.
The attorney suggested that Doyle schedule an evidentiary hearing at which he could show the court what steps had been taken to test the accuracy of the firm’s financial records.
Doyle scheduled that hearing for Sept. 21.
The bankruptcy case is In Re Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The criminal case is U.S. v. Wasendorf, 12- cr-2021, U.S. District Court, Northern District of Iowa (Cedar Rapids).
The regulatory case is Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-5383, U.S. District Court, Northern District of Illinois (Chicago).