A regulatory group ordered accounts frozen at Iowa-based brokerage Peregrine Financial Group late Monday, saying it hasn't been able to account for $220 million in customer funds, following what the company said was a suicide attempt by its founder and chairman. The brokerage has been placed on "liquidation-only" status.
The National Futures Association said it received information that PFG may have falsified bank records, and that the company only had about $5 million of $225 million it had claimed to have in a deposit account. The association, an industry group that serves as a self-regulatory role, said PFG could not demonstrate that it meets capital requirements and rules requiring it to segregate customer funds.
A PGF spokeswoman didn't return phone messages and emails from The Associated Press, and several messages left at PFG's offices in Cedar Falls, Iowa, and Chicago were not returned.
But in a statement to its clients, the company said its founder and chairman, Russell R. Wasendorf Sr., attempted suicide earlier Monday, though it provided no information on his condition. The company said the attempt prompted investigation of "some accounting irregularities."
Lauren Nelson, spokeswoman for PFG customer Attain Capital, said her company has a "substantial amount" of business with PFG and is still assessing how badly its accounts were affected. Nelson provided a copy of the PFG client statement to the AP.
The futures association's action bars PFG from most trading, except as needed to liquidate customer accounts. The company also can't accept any new customer money except to cover existing accounts.
It was unclear late Monday if the government would get involved. Pete Deegan, spokesman for the U.S. Attorney for the Northern District of Iowa, said he could neither confirm nor deny any investigations handled by the office.
But the move is likely to increase scrutiny on an industry still smarting from the implosion of futures firm MF Global last October.
MF Global, a brokerage headed by former New Jersey Gov. Jon Corzine, filed for bankruptcy protection, crippled by disastrous bets on European debt, less than two years after Corzine became CEO.
A bankruptcy trustee is still trying to recover $1.6 billion in money missing from MF Global's client accounts. That case prompted calls for increased regulation of the futures industry.
A message left at a phone listing in Cedar Falls for Wasendorf wasn't returned Monday. The local sheriff's office said it had no information on the suicide attempt, and the local hospital said it didn't have a patient listed under his name.
Fact File: PFGBest
What: Incorporated in 1990 and owned by Peregrine Financial Group, PFGBest is an online, retail brokerage specializing in futures and foreign exchange trading.
Where: Cedar Falls, Iowa
The allegations: Regulators on Monday alleged the company overstated its deposits by more than $200 million and have "reason to believe" the firm doesn't have enough assets to meet customer obligations.
CEO: Russell R. Wasendorf Sr, 64. Wasendorf attempted suicide Monday amidst the breaking allegations.
How much: There are $400 million in customer funds on deposit; customers are currently barred from accessing their money.
Rank among futures brokerages by customer assets: 37 out of more than 100.
Wasendorf's 2008 Letter
In a 2008 letter to the editor of The Wall Street Journal, PFGBest Chairman and CEO Russell Wasendorf Sr. argued against higher capital requirements for foreign currency brokerages, a move he said would hurt small firms and harm investors:
"Smaller firms' business activities are consistently transparent and are easily audited by regulators. Eliminating participation of smaller firms ... puts investors at risk."
Mr. Wasendorf grew up in Marion in eastern Iowa and studied at the University of Northern Iowa, leaving to pursue a career as a documentary filmmaker.
His introduction to the futures industry was with a trading program aimed at farmers at a time when the business was focused entirely in the teeming pits of the Chicago Board of Trade during the 1970s. He later worked as a journalist in the sector before starting his advisory firm.
He continued to work from Iowa before shifting his firm to Chicago in 1994 just as the futures industry started to boom with the advent of electronic trading, launching a foreign-exchange business a year later that remains a key part of PFGBest.
The shock on Tuesday was especially pronounced in Cedar Falls, Iowa, where Mr. Wasendorf moved the company's headquarters in 2009, building an office that sits at the end of a gated private road next the Beaver Hill Country Club. Mr. Wasendorf brought more than 70 staffers with him to Iowa, where he also opened a high-end Italian restaurant called myVerona, where signs on Tuesday read "closed until further notice."
"With a business like this in an area like this, it's going to have a huge impact," said Paul Hannam, whose business selling electrical equipment counted PFGBest's headquarters as a customer. "We don't have things happen like this in Cedar Falls."
Mr. Hannam, whose son Ryan worked at PFGBest, visited the headquarters Tuesday to offer support to an employee he had known for years. He praised the Wasendorfs as "very good community supporters."
No comments:
Post a Comment