This is a big deal:
Russell Wasendorf Sr., the sole owner and chairman of stricken futures broker Peregrine Financial Group, Inc., intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation told Reuters.
In a complaint filed on Tuesday alleging fraud, misuse of customer funds and making false statements to regulators, the Commodity Futures Trading Commission said the discrepancy between PFGBest’s reported balance and its actual cash had been going on since at least February 2010.
The scheme apparently began to unravel after the NFA began to press Wasendorf, who was an early advocate of electronic trading, to allow the regulator to confirm balances electronically and directly with the bank, rather than in a hard copy via mail, the person said.
NFA “started getting suspicious. He was resisting this new way of confirming the balance,” the source said.
Wasendorf only recently signed the authorization, a decision that would quickly have led regulators to uncover the discrepancy, the person said. PFGBest’s total segregated funds requirement was around $400 million, meaning more than half is missing.
When is the need for stronger regulation going to become clear? Though this fraud is small compared to others that have happened, it’s not any less troublesome.