In another blowup of spectacular fashion, Iowa-based futures and currency brokerage Peregrine Financial Group (PFGBest) shocked the trading industry on Monday as it froze trading accounts and announced that $200 million in customer funds appear to be missing. This happened less than nine months after the MF Global's demise.
On Monday, the National Futures Association, the US futures industry’s self-regulatory body, released an emergency order and put the company's funds on hold.
PFGBest told clients that "some accounting irregularities are being investigated regarding company accounts... the NFA and other officials have put all funds on hold, and PFGBest is in liquidation-only status with our clearing FCM. What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBest is not authorized to release any funds."
The company reported an estimated $200 million shortfall, and hid the fact the money was missing for more than two years, despite reporting to Commodity Futures Trading Commission (CFTC) as recently as June that they held around $400 million in client assets.
A few hours after the PFGBest disclosure, company founder and chairman Russell Wasendorf Sr. was found inside his car in an alleged suicide attempt near the Cedar Falls, Iowa company headquarters. 64-year old Russ Sr., was reportedly airlifted to University of Iowa Hospitals and Clinics and sunk in a coma.
Early Tuesday, the CFTC filed a lawsuit against the company and its founder, with accusation of fraud, customer funds violations and misstatement of financial records.
After serving clients for 20 years, PFGBest filed on Tuesday evening for protection under Chapter 7 of the US bankruptcy code, which showed the company "has between $500 million and $1 billion of assets, between $100 million and $500 million of liabilities, and between 10,000 and 25,000 creditors." The bankruptcy move was signed by Russell Wasendorf, Jr., the 42-year old President and Chief Operating Officer of the company.