Eight months after the bankruptcy of MFGlobal, another respected US futures brokerage, PFG, is being sued for fraud by US regulators in the latest hit to confidence in futures trading.
A complaint was filed last night in an Illinois federal court.
The US Commodity Futures Trading Commission has accused Peregrine Financial Group and its sole owner and chief executive, Russell Wasendorf, of misusing customer funds.
The CFTC alleged that PFG and Wasendorf "failed to maintain adequate customer funds in segregated accounts."
Wasendorf is reported to have tried to commit suicide at PFG's Iowa office on Monday and is thought to be in a coma.
The CFTC alleged they falsified information in filings and overstated the company's bank deposits, leaving a shortfall that currently, and has previously since 2010, exceeded $200m.
The CFTC alleged that PFG and Wasendorf used customer funds for purposes other than those intended by its customers, and said "the whereabouts of the funds is currently unknown."
Tuesday is a "sad day for the futures industry (and) what's left of PFG," said Phil Flynn, an energy analyst who left the company on May 31. Flynn said that one of the reasons he quit the company was news reports saying that PFG was allegedly involved in a Ponzi scheme in Minnesota.
Since February a string of US press reports, in Minnesota and in Iowa, where PFG is based, have suggested links between PFG and a $200m Ponzi scheme run by Trevor Cook, who is serving a prison sentence. Victims of Cook's Ponzi scheme filed a federal lawsuit against PFG, alleging the firm played a key role in the fraud.
Flynn said "apparently everybody is gone" at the company where he worked for five years. The financial press has evoked layoffs by the hundreds at PFG.
The Federal Bureau of Investigation said it was involved in the case. "We are assessing the situation and reviewing the facts," said an FBI spokeswoman in Omaha.
The CFTC suit came a day after the National Futures Association (NFA), responsible for monitoring PFG for compliance with reporting requirements, took an emergency enforcement action against PFG and Peregrine Asset Management.
The NFA blocked new or additional customer accounts or funds, alleging PFG had failed to prove it met capital and segregated funds requirements. The PFG troubles evoked memories of larger MFGlobal's spectacular collapse last October and the disappearance of more than $1 billion in customers' funds.
