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The Commodity Futures Trading Commission on Tuesday charged a futures firm and its chief executive with fraud and making false statements after nearly $200 million in customer funds went missing.
The regulator is seeking a restraining order against the Peregrine Financial Group, also called PFGBest, to prevent the destruction of any information that may be needed in the course of the investigation.
The commission is also asking a federal court to appoint a receiver for the firm and freeze its assets. A day earlier, the chairman and chief executive, Russell Wasendorf Sr., tried to commit suicide outside of the firm’s offices in Cedar Falls, Iowa.
The Federal Bureau of Investigation is investigating the matter, according to a spokeswoman for the Omaha division, Sandy Breault. Ms Breault indicated that the Chicago office of the F.B.I. might also become involved.
Late Tuesday, the firm filed for bankruptcy.
News of the missing money surfaced Monday, when the firm’s primary regulator, the National Futures Association, determined that an account that was supposed to have $225 million of customer money actually held just $5 million.
A further review of records showed that the firm had been falsifying its records as far back as 2010, the regulator said in its complaint. In February 2010, an account that purported to have some $218 million in reality contained just $10 million.
“P.F.G. and Wasendorf have used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds,” the complaint states. “The whereabouts of the funds is currently unknown.”
How the money came to be siphoned off from customer accounts remained a mystery, particularly in the wake of increased scrutiny on the futures industry after the collapse of MF Global.
After the fiasco at MF Global, in which more than $1 billion in customer money went missing, regulators vowed to ensure the safety of such accounts.
Both the National Futures Association and the futures commission conducted reviews of futures firms to reassure investors. The regulators granted them all clean bills of health.
PFGBest is well-known in the tight-knit community of futures brokerage firms. Mr. Wasendorf was considered by many to be a pioneer of the industry, and was registered with the commission since 1992. He fully owned PFGBest, and his son, Russell Wasendorf Jr., served as president of the company.
On Monday, the National Futures Association, which is an industry self-regulator, moved to halt operations at the firm immediately after discovering the shortfall.
In a report filed late Monday, the association said that bank statements from US Bank, where customer money was held, could have been fabricated.
This post has been revised to reflect the following correction:
Correction: July 10, 2012
Based on documents provided by the Commodity Futures Trading Commission, an earlier version of this article listed the incorrect headquarters of Peregrine Financial Group. The firm is based in Cedar Falls, Iowa, not Cedar Rapids.
Article source: http://dealbook.nytimes.com/2012/07/10/regulators-charge-futures-brokerage-with-fraud/?partner=rss&emc=rss