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Peregrine Files Bankruptcy

Collapse of the firm fueled by enhanced monitoring thanks to MF Global debacle.

Published on: Jul 11, 2012

Late Tuesday night Peregrine Financial Group filed for a Chapter 7 bankruptcy under the U.S. Bankruptcy code. The company claims between $500 and $1 billion of assets and between $100 million and $500 million in liabilities. The filing also claims 10,000 to 25,000 creditors.

A Chapter 7 bankruptcy - unlike Chapter 11 reorganization - usually means the company will be liquidated.

According to media reports, PFG may have been tripped up by enhanced monitoring that came as a result of last fall's failure of MF Global. Enhanced regulatory oversight includes electronic monitoring of brokerage monies at financial institutions where companies keep their cash.

MF GLOBAL BENEFIT? Collapse of the firm fueled by enhanced monitoring thanks to MF Global debacle.
MF GLOBAL BENEFIT? Collapse of the firm fueled by enhanced monitoring thanks to MF Global debacle.

For PFG that was U.S. Bank and when the National Futures Association checked the accounts they found only $5 million on hand where more than $200 million was supposed to be available. In most cases the funds missing are considered the segregated cash for clients.

The missing money is not on the level of the MF Global $1.6 billion scandal, but for the individual accounts of farmers and brokers who have been hit - yet again - it will be another hardship.

Russell R. Wasendorf, Sr., remains in the hospital after a suicide attempt Monday. According to a Reuters report, he had been intercepting regulatory documents from NFA, which allowed him to cover up account discrepancies. The move to electronic monitoring apparently short-circuited that process.

On Tuesday the Commodity Futures Trading Commission filed a complaint against PFG noting that the bank account that PFG reported was holding $225 million in 1,845 customer accounts actually contained only $5 million.

According to the bankruptcy filing, Wasendorf's son, Russell Wasendorf Jr., has been empowered to act for Wasendorf Sr. under a power of attorney dated July 3.

PFG was founded in 1990 and moved to the Cedar Falls, Iowa, area in 2009. The Wasendorf's have been considered important community leaders and it was a coup when the brokerage was moved to the city from Chicago.

Wasendorf suicide attempt details

Police documents released to the media detail what the police found when they discovered Wasendorf Sr., Monday morning. He was found after a 911 call was placed to local police. According to the report, paramedics had already arrived to find Wasendorf in his vehicle. Apparently a hose had been connected to the tailpipe and put into the passenger compartment.

The report says the "subject was removed from the vehicle. Subject was breathing but was incoherent."

The report also says "a note was found in the vehicle that indicated possible discrepancies with accounts at Peregrine Financial Group which was began (sic) by Mr. Wassendorf (sic)." The reporting officer notes that the information was forwarded to the FBI Field Office in Waterloo.