Peregrine Financial Group Inc., commonly known as PFGBest,
[ was an Iowa-based financial firm that operated for over 20 years. It was shut down in July 2012 after it was put under investigation for a $200 million shortfall in customer funds. Peregrine’s chief executive, Russell R. Wasendorf Sr., was arrested and charged with making false statements to the ]Commodity Futures Trading Commission
The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options.
The Commodity Exchange Ac ...
(CFTC).
The firm filed for bankruptcy on July 10, while listing more than $500 million in assets and over $100 million in liabilities.[Harris, Andrew]
Peregrine’s Wasendorf Sued for Mixing Firm, Client Funds
''Bloomberg News'', July 16, 2012.
Company history
During the mid to late-1990s, Peregrine Financial Group's office at the Chicago Mercantile Exchange had closed-circuit security cameras on the sales floor which is not and was not a common practice in the Chicago futures brokerage community while also recording all broker telephone lines.
Embezzlement of customer funds
Wasendorf attempted to commit suicide before his arrest and wrote in a confession letter that he had been "using a scheme of false bank statements to embezzle millions of dollars from customer accounts over a period of about 20 years." Congressional hearings questioned why the CFTC had not caught the embezzlement earlier and "the agency’s failure to adequately oversee the National Futures Association
The National Futures Association (NFA) is the self-regulatory organization (SRO) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives ( swaps). NFA is headquar ...
, the self-regulatory organization directly responsible for overseeing Peregrine."[Orol, Ronald D.]
"Lawmakers grill CFTC chief over broker failures"
''MarketWatch
MarketWatch is a website that provides financial information, business news, analysis, and stock market data. Along with ''The Wall Street Journal'' and ''Barron's'', it is a subsidiary of Dow Jones & Company, a property of News Corp.
Histor ...
'', July 17, 2012. ''MW'' misidentified the firm's hometown as Cedar Falls. Retrieved 2012-07-17. The firm had been moved by Wasendorf from Chicago in 2009 to a new 18 million dollar building in Cedar Falls, Iowa.[
In August 2012, Wasendorf was indicted on "31 counts of lying to regulators.... e... could face up to 155 years in prison and a $7.8 million fine. eallegedly stole as much as $215 million from customers over a 20-year period." He pleaded guilty to all charges, and in January 2013 federal judge Linda Reade sentenced him to 50 years of prison.
]
Litigation
The CFTC filed a criminal complaint in Cedar Rapids
Cedar Rapids () is the second-largest city in Iowa, United States and is the county seat of Linn County. The city lies on both banks of the Cedar River, north of Iowa City and northeast of Des Moines, the state's capital and largest city. ...
against the Cedar Falls firm Peregrine Financial Group, Inc., and Russell R. Wasendorf, Sr.[Porter, Caroline]
"Brokerage Scandal Shakes Small Iowa Town"
''Wall Street Journal'', July 12, 2012. Retrieved 2012-07-18.
Wasendorf was also sued on July 13 by Michael LaSalvia of Naperville, Illinois, who sought class action status for his suit against the CEO and his son. LaSilvia also alleged that Wasendorf had mixed client and firm money.[Harris, Andre]
''Bloomberg'', July 19, 2012.
On July 27, attorneys for the 1970s rock band The Knack
The Knack was an American rock band based in Los Angeles that rose to fame with its first single, "My Sharona", an international number-one hit in 1979.
History Founding (1977–1978)
Singer Doug Fieger was a native of Oak Park, Michigan, a no ...
sent a cease and desist letter to Wasendorf and his already shut Italian restaurant MyVerona in Cedar Falls, Iowa, demanding he stop using a recording of the band's smash hit "My Sharona
"My Sharona" () is the debut single by the Knack. The song was written by Berton Averre and Doug Fieger, and it was released in 1979 from their debut album, '' Get the Knack''. It reached number one on the ''Billboard'' Hot 100 singles chart, w ...
" in the restaurant's advertising. The song, with a chorus modified to "M-M-M-My Verona," had been used for years as a theme song on the company website. "The Composition is one of the most popular songs of all time, and companies pay our client significant sums for the right to obtain a license for the use of the composition," the letter said.
Liquidation
Michael Eidelman, the receiver for Wasendorf in the bankruptcy of PFGBest, is tracking assets which may be linked to Wasendorf's corporate actions including a $100,000 personal wine collection, a high-end Italian restaurant in Cedar Falls, a jet, and two residences with $1 million estimated value.
The bankruptcy filing specified between 10,000 and 25,000 creditors. The trustee for the firm, Ira Bodenstein, started with the court by identifying 11 clients, primarily owners of warehouse receipts for precious metals, of about 24,000 futures customers with specifically identifiable property eligible to be returned to them.[
]
Recovery of Customer Funds
As of December 2014, customers were in line to recover 44% of funds held at the firm.
Media Coverage
Peregrine Financial Group CEO's attempted suicide and his confession to a massive fraud was covered as a documentary on CNBC's American Greed
''American Greed'' (also known as ''American Greed: Scams, Scoundrels and Scandals'' and as ''American Greed: Scams, Schemes and Broken Dreams'') is an American documentary television series on CNBC. The series focuses on cases of Ponzi schemes, ...
show as Episode 87 under the title "The Falcon & the Con Man" "American Greed Episode 87 The Falcon & The Con Man"
/ref>
References
{{Reflist
External links
Last Days - The Fall of Peregrine
''Wall Street Journal'', video 12m19s, August 13, 2012
''Christian Financial Radio Network'', article, January 8, 2014
Fraud in the United States
Financial scandals
Defunct financial services companies of the United States