- Last Updated: 8:50 AM, July 11, 2012
- Posted: 11:38 PM, July 10, 2012
The sudden collapse of a Midwest commodities broker continued to smolder yesterday as federal agents launched a criminal probe into more than $220 million in missing client money and a US regulator charged the firm with fraud.
Peregrine Financial Group’s alleged financial shenanigans were laid bare hours after its founder and CEO Russ Wasendorf Sr., tried to commit suicide in the company’s parking lot — and left a note about financial troubles at the 32-year-old firm.
Wasendorf, a pillar of his Cedar Falls, Iowa, community, remained in a coma yesterday after he was found in his car by his son, an executive at the firm.
“We are assessing the situation and reviewing all the facts,” an FBI spokeswoman told The Post yesterday.
At the same time, the Commodity Futures Trading Commission filed suit against the firm — whose online trading arm is known as PFGBest — and its 64-year-old owner, charging both with falsifying bank records.
Wasendorf, according to the CFTC suit, claimed to have more than $225 million in customer cash in segregated accounts at US Bank.
“However,” the suit charged, “the actual balance in the account was approximately $5 million.”
Wasendorf “misappropriated” the funds from thousands of customers — and filed false reports to cover his tracks, the CFTC charged.
PFGBest was also involved in futures trading.
Wasendorf — who gave away millions to local institutions including the University of Northern Iowa — was found by his son, Russell, in his car with a hose attached to the exhaust and leading into the car, sources said.
Also in the car was a suicide note describing “discrepancies with accounts at Peregrine,” according to a report filed by the Black Hawk County Sheriff’s Office.
The note prompted PFG’s main auditor, the National Futures Association, to check its most recent audit. When NFA discovered a mere $5 million on deposit, it immediately froze trading activity.
As a result, PFG filed for Chapter 7 bankruptcy protection while it liquidates.
Papers filed yesterday with the US bankruptcy court show that Peregrine has assets of between $500 million and $1 billion, with liabilities of between $100 million and $500 million, and between 10,000 and 25,000 creditors, according to a Reuters.
Wasendorf’s downfall has stunned local residents who knew him as a hot-shot entrepreneur and a prominent member of the business community.
“It’s terrible. It’s a shame,” said “Muggs” Steinfeldt, whose granddaughter works for Peregrine. She said she’s worried Wasendorf “used other people’s money” to live the high life, including owning a fancy local restaurant, My Verona, and a 7-acre property.
“We are positively irate. We feel we have been betrayed by our business associates, regulators and government,” Attain Capital Management, which had money with Peregrine, said yesterday in a letter to clients.
The firm said it had received “multiple” assurances from Wasendorf that the firm was “no MF Global,” the commodity brokerage firm that lost more than $1 billion of customers’ funds when it blew up last year.
—Additional reporting by Anelia Dimitrova