Peregrine Financial Group Losses Draw Investor Lawsuits

Peregrine Financial Group (“PFG” or “PFGBest”) is the subject of an increasing number of lawsuits following its bankruptcy filing last week.

The financial derivatives brokerage firm, based in Cedar Falls, Iowa with offices in Chicago, collapsed when founder Russell R. Wasendorf, Sr. was rescued during a suicide attempt. A note he left admits, “Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc.”

PFG was one of the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries, according to the firm’s website. For 13 consecutive years, PFGBEST was ranked as one of the nation’s Top 50 Brokers in Futures magazine annual roundup.

A “Futures Commission Merchant” (“FCM”) is defined as an individual or entity that solicits or accepts orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any exchange. FMCs also accept payment from or extend credit to those whose orders are accepted.

Investors are charging that the firm violated a basic broker regulation forbidding the commingling of client funds with other firm monies.

The Commodity Futures Trading Commission, in accordance with the Commodity Exchange Act, requires that customer funds to be segregated and separately accounted for. Specific regulations include:

• All customer funds shall be separately accounted for and segregated as belonging to commodity or option customers. Such customer funds when deposited with any bank, trust company, clearing organization or another futures commission merchant shall be deposited under an account name which clearly identifies them as such and shows that they are segregated.
• Each futures commission merchant shall treat and deal with the customer funds of a commodity customer or of an option customer as belonging to such commodity or option customer. All customer funds shall be separately accounted for, and shall not be commingled with the money, securities or property of a futures commission merchant or of any other person, or be used to secure or guarantee the trades, contracts or commodity options, or to secure or extend the credit, of any person other than the one for whom the same are held, with some additional provisions.

The rules of the Chicago Mercantile Exchange (“CME”) similarly prohibit commingling of customer funds with other firm funds.

Approximately $200 million in client funds are allegedly missing.

Fort Lauderdale Securities Litigation Attorney and FINRA Arbitrator

Contact Fort Lauderdale securities litigation attorney Howard N. Kahn, Esq. if you or someone you know has a securities dispute. In addition to being an experienced securities litigation attorney, Mr. Kahn also serves as a FINRA arbitrator for individual investors, brokers, and brokerage firms. You can reach him at 954-321-0176 or online.