Friday, 22 May 2015
Last updated 13 hours ago
Jul 18 2012 | 2:09am ET
Hedge funds and other clients of Peregrine Financial Group may have little hope of recovering the $215 million that is missing from the collapsed futures brokerage's accounts.
That's because PFG founder Russell Wasendorf, who has been charged with fraud, says he spent most of the money he stole. The latest bombshell in the story comes from the confession Wasendorf wrote and signed before attempting to commit suicide last Monday. That document includes the admission that Wasendorf "committed fraud" and "cheated," going into detail about how he deceived regulators and his own employees. But it goes further, The Wall Street Journal reports, blaming regulators for forcing him to begin the fraud in the first place.
"Most of the misappropriated funds went to maintain the increasing levels of Regulatory Capital to keep in business and to pay business," Wasendorf wrote. The PFG founder said the fraud began around 1993 due to a Commodities Futures Trading Commission investigation that led to a "technical violation" that raised PFG's capital requirements.
Wasendorf, who said he was "harassed" by six on-site CFTC audits over a five month period, wrote that he did not "feel bad about deceiving the regulators."
"They made the decision to be my enemy."
According to the Journal, the stolen money—Wasendorf admits to taking "more than $100 million"—went to shoring up PFG's capital, building its new Cedar Falls, Iowa, headquarters, and paying fines and fees.
Separately, the regulator that Wasendorf called his "enemy" admitted that it had chances to stop the PFG fraud but "failed." CFTC Chief Gary Gensler admitted that it audited the firm last May and was in the process of conducting another audit when the firm failed last week.
"Although we do not know the full facts of what happened in this matter, the system failed to protect the customers of Peregrine," Gensler told the Senate Agriculture Committee yesterday. "Just like the local police cannot prevent all bank robberies, however, market regulators cannot prevent all financial fraud."
"Nevertheless, we all must do better."
Meanwhile, the first of what are likely to be a number of client civil suits against PFG and Wasendorf came, with a customer accusing both Wasendorf and his son, also Russell Wasendorf and PFG's chief operating officer, of improperly commingling funds. Michael LaSalvia is seeking class-action status for his suit.
For his part, Wasendorf, who has been in custody since his arrest on Friday, will seek bail at a court hearing today.
Mar 20 2015 | 12:45pm ET
StreetWise Partners, a non-profit organization that works with low-income individuals to help them overcome employment barriers, raised over $275,000 at the 2015 Raising the Ante Charity Poker Tournament and Casino Event last Wednesday evening at Capitale. Here are some photos from the event. Read more…