WASHINGTON, July 11, 2012- Peregrine Financial Group (PFG), a registered futures commission merchant based in Cedar Rapids, Iowa, and Chicago, Illinois, falsely reported more than $200 million in customer funds. Regulators, who believe PFG began false calculations in 2010, froze the firm’s customer accounts this week and claimed the firm failed to segregate customer funds, misappropriated customer funds and made false statements.
“From a systemic standpoint, the question is whether there is effective oversight in our commodity trading system,” Grassley said. “People need to have confidence in our commodity trading system in order for it to work for farmers and investors the way it’s intended.”
“Regulators need to be on the ground working diligently to sort out what's going on, and I would expect the Senate Agriculture Committee to look into this matter in the same way it continues looking into MF Global,” he added.
The National Futures Association (NFA) announced Monday that PFG failed to demonstrate that it meets capital requirements and segregated funds requirements. NFA, responsible for monitoring PFG for compliance, also said it had reason to believe that PFG did not have sufficient assets to meet its obligations to customers.
According to the complaint filed Tuesday against PFG by the Commodity Futures Trading Commission (CFTC), the financial firm falsely represented that it held more than $220 million of customer funds when it only held $5.1 million. The complaint, filed in the United States District Court for the Northern District of Illinois against PFG and its owner, Russell Wasendorf, alleged that PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts from at least February 2010 through the present.
According to the complaint, Wasendorf attempted to commit suicide Monday and in the aftermath, NFA staff received information that he may have falsified certain bank records. Of the approximately $200 million shortfall in customer funds, CFTC said "the whereabouts of the funds is currently unknown."
Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., indicated in a statement Tuesday that Congress has the responsibility to evaluate regulators’ oversight.
“We are working closely with regulators to find out what happened because farmers and small businesses need assurances that their funds are safe from reckless or criminal activity,” she said. “Congress also has a responsibility to assess current customer protections and strengthen them where needed to put a stop to executives misusing customer funds in the future.”
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