MF Global deja vu? $220 million goes missing at futures brokerage

It feels like doomsday at mid-size Iowa futures brokerage PFGBest, where $220 million in customer funds have gone missing, accounts have been frozen by an industry regulator and the company’s chief executive attempted suicide Monday.

Less than a year after Wall Street brokerage MF Global imploded under similarly suspicious circumstances, the National Futures Assn. said it took “emergency enforcement action” against PFGBest parent Peregrine Financial Group Inc. and and its Peregrine Asset Management Inc. unit.

The regulatory body said it “has reason to believe that PFG does not have sufficient assets to meet its obligations to its customers.” The brokerage was blocked from trading and allowed only to liquidate existing customer positions.

Late Monday, the Cedar Falls and Chicago-based firm said it was investigating “some account irregularities.”

The company also said in a statement that its Chief Executive, founder and Chairman Russell R. Wasendorf Sr. was involved in “a recent emergency,” which it then characterized as “a suicide attempt.”


As recently as June 29, PFG had reported to regulators that it had $225 million in customer funds deposited at U.S. Bank.

But on Monday, the National Futures Assn. received a tip that Wasendorf may have falsified bank records and found that, just days earlier, PFG had only $5 million in the bank.

PFG had also told regulators that $207 million was deposited during February 2010 and $218 million during March 2011 when there was actually less than a $10 million balance during each month, according to the NFA.

[Updated, 9:20 a.m.: Federal regulators on Tuesday sued Peregrine Financial Group and Wasendorf, alleging fraud committed by misappropriating customer funds and falsifying financial statements.

The complaint from the Commodity Futures Trading Commission was filed in Illinois and claims that since Feb. 2010, PFG and Wasendorf didn’t keep the required amount of customer funds in segregated accounts.

The FBI is also looking into the company.]

Last fall, MF Global went belly-up in spectacularly high-profile fashion. Government authorities spent much of the following months combing through the wreckage of the firm, run by former Goldman Sachs Chairman and New Jersey Gov. Jon Corzine.

In the wake of the MF Global scandal, PFG issued a letter to customers in November to “reaffirm the absolute dedication” of the firm to protect client interests.

The company abides by all regulations to separate customer money from operational funds, reports regularly to regulators and submits annually to independent audits, President Russ Wasendorf Jr. wrote in the letter.

“It is our policy to keep extra funds on deposit in our customer segregation accounts to protect you,” he wrote.


JPMorgan Chase discloses $2-billion trading loss

Foreign currency broker FXCM is hit with $2-million fine

MF Global goes bankrupt, is 1st U.S. casualty of European crisis

Follow Tiffany Hsu on Twitter and Google+