Eight months after the shock bankruptcy of MFGlobal, another respected futures brokerage, PFG, is being sued for fraud by US regulators in the latest black eye to confidence in futures trading. In a complaint filed Tuesday in an Illinois federal court, the US Commodity Futures Trading Commission accused Peregrine Financial Group and its sole owner and chief executive, Russell Wasendorf, of misusing customer funds.
The CFTC alleged that PFG and Wasendorf - who it said tried to commit suicide at PFG's Iowa office on Monday and is thought to be in a coma - "failed to maintain adequate customer funds in segregated accounts."
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 $200 million.
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 told AFP 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 $200 million 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.
"I had concerns based on what I was reading," Flynn said. "I had no proof that they were doing anything wrong."
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