Just as everyone is honing in on any number of financial scandals, creditor woes and unemployment, a new scandal erupts and with it, a series of events that have even the most skeptical Wall Street pros wondering where it’s all coming from. Peregrine Financial Group has taken over the headlines and we’re out to discover why. Here’s the latest.
The Timeline
In recent days, a brokerage firm with ties to both Chicago and Iowa, Peregrine Financial Group, found itself in the crosshairs of investigators as a $200 million shortfall was discovered in its customer segregated accounts. Within days, its CEO Russell Wasendorf left a suicide note that included a confession of sorts. This prompted not one, but several more investigations. The assets have been frozen, the suicide attempt was just that: an attempt, which is surely a blessing to CEO Wasendorf’s family and now, several other firms are demanding answers.
Attain Capital, another Chicago firm and through its spokesperson Josh Brown, is demanding answers. This firm also had some assets that were being managed by PFG. In a written questionnaire, of sorts, Brown is demanding answers. The letter is succinct, definitive and serves its purpose. Not only is PFG confronted, but regulators are in the hot seat, too.
…it has become abundantly clear that our regulators are asleep at the wheel. The NFA answers to the CFTC, and the CFTC is to answer to Congress. Yet, the CFTC clearly failed to monitor NFA responses to the MF Global crisis, and we saw in the MF Global Congressional proceedings that our elected officials are more interested in political grandstanding than thorough investigation and effective questioning. Perhaps more importantly, they have little to no understanding of the way the markets they regulate over oversee operate.
We’re almost certain we heard a collective “yee haw” when the statement hit the media earlier on Tuesday. But Brown wasn’t finished. He made it abundantly clear that he and his firm “are positively irate”. He goes on to say he and the firm feels betrayed by a number of folks – including regulators and even the U.S. government. Admitting the best route is the one that maintains an even keel and allows them to “deal with the facts as they come in”, he says “the Chicago in us isn’t about to take this lying down”. It was then we were sure we heard a second collective “yee haw” across the nation.
Plain and Simple Reform
So what does Attain Capital and its bold (and frankly, refreshing) team want? Reform – plain and simple. They are also calling for Congressional inquiries. And it just might have worked. The FBI announced today it was now involved in the missing $200 million, along with the shortcomings of regulators. Not only that, but CFTC has now lodged its own formal complaint:
From at least February 2010 through the present, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations. This complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges.
So where is the money? No one’s talking, but clients’ positions in the funds are being liquidated according to Reuters. Meanwhile, Wasendorf remains in the hospital after being found in the midst of his suicide attempt.
The whereabouts of the missing $200 million are currently unknown, the complaint says.
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