Reuters’ Ann Saphir and Alexandra Alper and P.J. Huffstutter have new details about the fraud allegations against Chicago- and Iowa-based futures brokerage Peregrine Financial Group, which earlier today filed for Chapter 7 bankruptcy, shaking a futures industry still recovering from the collapse of MF Global. Citing an anonymous source close to the situation, the trio report CEO Russell Wasendorf Sr. was secretly intercepting statements and regulatory documents mailed by the National Futures Association, PFG’s regulator, and intended for U.S. Bank, the firm’s banker.
“…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,” they write.
“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.”
Wasendorf’s condition remains unknown. The FBI and CFTC are investigating a $200 million shortfall in PFG’s customer-segregated funds.
“As more details of the scandal became clear, the circumstances began to look more like a Bernard Madoff-style fraud than MF Global CEO Jon Corzine’s desperate bid to stay afloat,” the reporters say.