PFGBest Missing $220m, Founder Attempts Suicide
I had to preempt my screed against the French today to bring you guys this news because it's pretty bizarre.
On Monday morning, Peregrine Financial Group founder Russ Wasendorf Sr. tried to kill himself. While the media didn't report how, insiders at the company said that a secretary was looking out the window and noticed his car was parked away from everyone else and not in his designated spot, so she told his son (Russ Wasendorf Jr.). It appears his son discovered a suicide note pointing to accounting irregularities just prior to this (or maybe right after - unclear at this point), so he ran downstairs to find his dad in the car with a hose pumping exhaust into it. That's never a good sign if you're a firm employee.
Yesterday the other shoe dropped when regulators accused the firm of misappropriating $220 million in customer funds. The firm collapsed pretty much on the spot, and employees packed up their desks and left. The firm's trading partners froze all the firm's accounts and put everything into a "liquidation only" status.
This is big news because it deals another crippling blow to the already tenuous faith in the financial markets held by most investors. It's one thing to lose money on a bad trade; it's another thing entirely when the guy you trusted to place the trade for you is just pocketing your money. In the wake of MF Global, this PFGBest nightmare is going to cause major problems for non-clearing FCMs and could effect the overall liquidity of the futures market (if it hasn't already).
Another thing that sucks is that I recently advised one of you to accept an offer from PFGBest despite their somewhat sketchy reputation because it was the best of two offers presented. That's why I hate giving that kind of advice, and I certainly hope it went unheeded in this case. If not, you have my condolences.
So what was going on, in a nutshell?
Wasendorf intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry group believed was U.S. Bank, PFG's bank, a person close to the situation told Reuters. Instead, they were sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said, who declined to be identified.The CFTC complaint, which relies on many of the details released on Monday by the NFA, the broker's main regulator, said the bank account that PFG reported was holding $225 million in 1,845 customer accounts actually contained only $5 million.
Wasendorf forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said. The scheme apparently began to unravel as the NFA shifted to electronic confirmations.
The NFA "started getting suspicious. He was resisting this new way of confirming the balance," the source said. Wasendorf only recently signed the authorization, a decision that would quickly have led regulators to uncover the discrepancy.
- excerpted from this article.
I really wonder how many more of these are lurking out there. I'd love to hear from any counterparties that are tied up in the mess. What are they telling you guys?
wow...sad.
strange that he attempted this at work? probably not.
details will start spilling out on where that money went now.
1.) Pull $5 million out of the bank. 2.) Rent a UHaul truck and drive to Florida. 3.) Sail to Cuba. 4.) Lay low for a while.
I believe he's still missing. http://www.huffingtonpost.com/2012/07/10/aubrey-lee-price-fbi_n_1661709…
I believe he's still missing. http://www.huffingtonpost.com/2012/07/10/aubrey-lee-price-fbi_n_1661709…]
Haha exactly what I was thinking. What's wrong with these guys, honestly. Do they really think they're the smartest crooks out there and no one could possibly catch them? Do they hope they just die before anything sees the light of day? Its absurd.
I saw some really nice looking yachts down there.
This is almost exactly right. The only thing is don't actually get a U-haul. Rent a truck from one of those mom and pop type places in the city. They literally don't have a "system" and it'd be weeks before anyone figured that out.
Otherwise, by a car cash off Craigslist. The only issue with that is you'd have to throw old plates on the car and hope not to get stopped. Actually, I'm sure I could go into Chicago and offer someone $3k cash for their car and get them to keep the plates on it.
I'd also get/rent/steal the boat from craigslist.
sounds like he took Mad Men too seriously..
This is very sad. What we need is annual audit from independent firms. As we saw with MF and now PFG, NFA and CFTC audits aren't working.
I was introduced to PFG few months ago when I was looking for a broker and I almost opened my account with them. Now, I am glad I didn't join PFG.
Yeah. They'd probably be putting out an APB on his car right now, but it would take them 2-3 more days to find a car rental record. Especially from a company with a system as screwed up as UHaul. By that point, you'd already be in Cuba.
Don't use your credit or ATM cards, don't speed, don't get on airlines. And keep a low, low profile when you get there. Meaning that regardless of how much money you took, you can't really spend more than $60K/year. You're Bob, the southern-accented backslapping tourist who stood in the middle of the sidewalk in Times Square to take a picture while those mean New Yorkers shoved past you.
Actually, scratch UHaul. The truck would break down after 150 miles.
Jay Z put it best..."im like uhaul...every bitch that moves, I fuck"
Seriously though, has any futures broker in the last decade got into trouble financially that we later found out HADNT misparopriated segregated customer money? Pretty scary/fucked up.
There's a word to describe this now...Corzined....how sad.
japanese CEOs have the decency to kill themselves properly when they fuck up this bad
I wanna see how many hours we can go without having a new major financial scandal hitting the headlines
Set the over/under at 3.5 hours
GO
Is there ever just one roach? There are others in the wood works. After MF Global, PFG, and the delicious, ongoing LIBOR scandal, it should be patently obvious that regulators are: 1) completely incompetent; and 2) captured by their respective industries. In case you didn't already know- check your counter parties. Unfortunately, this usually means using the biggest counterparty available. Should malfeasance happen, the government is more likely bail them out (what a world we live in). Don't have a counterparty if at all possible.
I'm really surprised, and even disappointed (feel free to monkey shit away) at all the people saying he should have pocketed the money and run away. Now this might be better than killing yourself, but if he is guilty of fraud here, he never should have done it in the first place. And if he gets caught for it, he should man up and face the consequences of his actions. To run and hide is cowardly.
I'm not saying he should have done it. I'm saying that's better advice than "kill yourself".
I completely agree with you that fraud is wrong. I agree that it is probably better to turn yourself in. But if you find yourself in a situation where the police cars are outside your door and you'd rather die than spend the rest of your life in jail, there are other options. But they are a lot more miserable than living an honest middle-class life.
What about retail equities brokers like Schwab and Fidelity?
Honestly, I'm thinking about going in and requesting direct registration on some of my core holdings.
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