Either the CFTC has known about potential fraud at PFG since 2010, or they've been poring over the books for the last 20 hours and just discovered it.
Which sounds more plausible to you... ?
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WASHINGTON—An alleged fraud and misappropriation of customer funds by futures merchant Peregrine Financial Group Inc. started more than two years ago, according to a lawsuit filed Tuesday by federal regulators.
"In the wake of MF Global, this latest failure raises serious questions about our current regulators and whether they are capable of doing their jobs," said Sen. Richard Shelby, ranking Republican on the Senate Banking Committee.
The FBI is also conducting an investigation.
In the aftermath of Mr. Wasendorf's reported suicide attempt, the CFTC and National Futures Association received information indicating that Mr. Wasendorf "may have falsified certain bank records," according to the complaint by the CFTC, which said it is seeking restitution and civil monetary penalties. Mr. Wasendorf "failed to segregate customer funds and misappropriated those funds," the CFTC alleges.
The CFTC said there were shortfalls in customer accounts since at least February 2010.
Peregrine told the National Futures Association in a July audit that it had $220 million in customer funds, when there was actually only $5.1 million, the CFTC alleges in the complaint filed in the Chicago-based U.S. District Court.
CFTC Chairman Gary Gensler said Tuesday at a scheduled meeting that the agency should pass rules that "further enhance segregation of customer funds," adding that his staff is working on "recommendations on enhanced internal controls and transparency" for customer money held by futures firms.
"If somebody is going to defraud their regulators, effectively lie, we're going to vigorously pursue that and that's what you're seeing here," Mr. Gensler said after a CFTC meeting.
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Related:
PFGBest: The Corporate History
PFGBest’s Wasendorf Was a Mouthpiece for Futures Industry
In a 2008 letter to the editor of The Wall Street Journal, PFGBest Chairman and CEO Russell Wasendorf Sr. argued against higher capital requirements for foreign currency brokerages, a move he said would hurt small firms and harm investors