John Lothian News has learned from company sources and an internal memo distributed to employees at Cedar Falls, Iowa- based PFGBest that funds at PFGBest have reportedly been frozen by regulators due to accounting irregularities. The National Futures Association (NFA) has reportedly put a hold on all PFGBest customer funds and put the firm on liquidation only, meaning customers can only exit trades, not enter into any new trades. In addition, a memo from PFGBest mentioned a possible suicide attempt by PFGBest’s chairman and CEO.
In a memo issued by customer service of PFGBest to brokers and customers, PFGBest said:
“Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts.”
Further, the company said in the memo that “NFA and other officials have put all funds on hold, and PFGBest is in liquidation-only status with our clearing FCM. What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBest is not authorized to release any funds.”
NFA did not immediately respond to a request for comment. A representative from PFGBest also did not immediately respond to a call of inquiry.
Update 1 (4:31 PM CST):
A woman at the answering service for Sartori Memorial Hospital In Cedar Falls, Iowa confirmed that a Russell Wasendorf was admitted to the emergency room there Monday.
Russ Wasendorf Sr. has been a futures trader since 1972 and established Peregrine as a futures commission merchant in 1992. He has stated publicly that he has plans to get married in August.
Update 2 (5:14 PM CST):
Local news publication WCF Courier.com reported that company officials confirmed Wasendorf had attempted suicide Monday morning outside the corporate headquarters in rural Cedar Falls. WCF Courier said Wasendorf is a Cedar Falls native.
PFGBest built and opened its new offices in Cedar Falls, IA in 2009, and has made a number of acquisitions in recent years. It purchased the assets of Alaron Trading in 2009 and acquired the assets of American National Trading Corporation in 2007. In 2008, the firm then known as Peregrine Financial Group changed its brand name to PFGBest. It offered forex brokerage in 2004, and expanded further in 2009 with BestDirect Securities, and a precious metals division that same year.
In February 2012, R.J. Zayed, a receiver representing victims of the Crown Forex/Trevor Cook Ponzi scheme, filed a $48 million lawsuit against PFGBest. The suit alleged that PFGBest ignored repeated warnings that Cook’s firm was running a Ponzi scheme, that included activities such as commingling customer funds to cover margin calls, making false and misleading statements to customers, and operating as an unregistered commodity pool.
The firm’s latest filing with the CFTC showed that it held $401.9 million in customer segregated funds, as of April 30, 2012.
Update 3 (5:54 PM CST):
In a Member Responsibility Action, released Monday afternoon, NFA alleges that PFGBest’s reported customer funds deposited at U.S. Bank did not match the amounts NFA found when NFA contacted the bank Monday. On June 29, 2012, PFGBest reported to the NFA that they had nearly $400 million in customer funds, of which approximately $225 million was purportedly deposited at U.S. Bank. The actual funds found in the account were approximately $5 million.
Furthermore, the NFA alleges that in contrast to purported bank confirmations submitted to the NFA that sought to confirm U.S. Bank balances as of February 2010 and March 2011, reported balances of approximately $207 million and $218 million, respectively, were actually less than $10 million for each of these months.
NFA says in the MRA that PFGBest was unable to demonstrate to the NFA that it had sufficient capital to meet its minimum adjusted net capital requirements or segregated funds to meet its obligations to customers.
Reporting by Christine Nielsen.