Is PFG The Next MFG?
Tuesday morning, it was revealed that Peregrine Financial Group may be the next MF Global. The CFTC announced that over $200 million of customer money was missing as of this morning, as the brokerage reported a cash deposit at U.S. Bank (NYSE: USB) of $225 million. The CFTC only uncovered $5 million in the accounts, leading it to charge the firm with fraud.
CEO Russel R. Wassendorf is the founder of Peregrine Financial Group, Peregrine Asset Management, and PFGBest brokerage. As the news broke, it was also revealed that Wassendorf had apparently attempted to commit suicide. It is unkown whether the events are related and the chronology in which they occurred has yet to be determined.
The company released the following statement on the news: "Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts." This statement only fueled further confusion around the ordeal, as it has yet to be determined whether the money disappeared illegally or it is accidentally misplaced in a separate account.
Unlike the MF Global fallout, there are no mega-bank counterparties involved, so it is more likely that individuals and small funds will see some funds returned. In the wake of the MF Global bankruptcy, customers afraid of losing funds closed other accounts at other firms and stopped trading as they were afraid of losing any more funds.
As the saga unfolds, it will be seen if trading in futures sees less volume as it did after the MF Global event. Less futures volume would make assets such as commodities less liquid, increasing price volatility.
Jefferies (NYSE: JEF), the brokerage many thought would be the next to fail after MF Global, said that its PFG positions were secure and that it doesn't see any significant losses regarding the news out of PFG.
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