Corzine Lite

PFGBest is now not so ‘best’

Remember when the entire segregated account fiasco was supposedly fixed in the aftermath of the November 2011 MF Global bankruptcy, and where regulators: the CFTC, the SEC, the CME, and anyone you asked, swore up and down this would never happen again? Turns out that 7 months later, the spirit of MFG has struck again, only this time with one letter switched: it is now known as PFG, as we suggested first 3 hours ago when we broke the story. From the just filed affidavit by Lauren Brinati who is working with the National Futures Association, which in turn has just filed notice prohibiting PFGBest from operating further, and freezing all of its accounts:

On or about June 29, 2012 PFG reported to NFA that it had approximately $400 million in segregated funds, of which more than $225 million were purportedly on deposit at U.S. Bank
On or about July 9, 2012, NFA received information indicating that PFG’s Chairman may have falsified bank records
On July 9, 2012, NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank.

As Mr. Valentine so sagely observed

Unlike politically-connected bungler bundler Corzine, who was last seen crest-fallen with a tepid latte in the Hamptons and looking for a party invite, it seems the founder of PFG has fallen on his sword

PFGBest on Monday told its foreign exchange and commodities customers that their accounts had been frozen after an apparent suicide attempt by its chairman. A few hours later, an industry body said about $220 million in customer funds were not in the brokerage’s bank accounts.

…The PFGBest disclosure came hours after owner Russell R. Wasendorf Sr, a 40-year veteran of futures markets, was found in his car near the company’s Iowa headquarters, having apparently attempted to commit suicide. He is in critical condition at the University of Iowa Hospitals, according to local news reports.

I hope he recovers, because I want him to go to jail if the above is true.

But really, who the hell is auditing these people

PFGBest was among the firms that scrambled to reassure customers of the safety of their funds last November just after MF Global’s collapse, posting a notice that said the firm “reports daily and monthly to regulators concerning customer segregated accounts.” A number of former MF Global customers also moved their trading accounts to PFGBest.

But by November, it seems, funds at the Iowa brokerage were already missing. The NFA said in Monday’s letter that previous customer account balances from February 2010 and March 2011 reported by the firm may have been inflated by as much as $190 million, with PFGBest only holding $10 million of a claimed $200 million.

In the letter, it said PFGBest clearing unit Peregrine Financial Group (PFG) had told the NFA just two weeks ago that it held $400 million in customer segregated funds, of which over $225 million was on deposit at the firm’s bank.

But on Monday, after receiving information that PFG’s founder and owner may have falsified bank records, the NFA said that only $5 million was on account at the bank days earlier.

Whoever signed off on these statements needs to go to jail.

Oh golly, this makes a lot of sense

“We had personal assurances from Wasendorf senior as recently as two weeks ago that they were not like MF Global,” said Lauren Nelson, director of communications for Attain Capital, an introducing broker specializing in managed futures in Chicago.

Well, gee, I guess my fears were misplaced then! We had his word on it

5 Responses to “Corzine Lite”

  1. Skyler says:

    I wish I understood half of all that because it sounds pretty important and scary.

  2. Gary from Jersey says:

    Amazing the amount of damage one guy can do. Who the hell audits the auditors?

  3. Mr. Bingley says:

    One guy can’t do it, Gary. Others had to sign off on it.

  4. aelfheld says:

    They’d have been better off if they had had Joe Isuzu running things.

  5. JeffS says:

    Why bother with the expense of auditors, accountants, security, and so on? Just stack the cash on pallets out in the lobby. It would be the same thing in the end.

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