Twenty years of lies: how the head of Peregrine Financial robbed 13,000 traders (PFGBest)

Russell Wasendorf Sr. personally intercepted the auditors' mail so that they would never see his company's real bank statements — and he did so for twenty years running. Peregrine Financial Group, better known to clients as PFGBest, had for years enjoyed a reputation as one of the most stable independent futures brokers in the US. When the scheme finally fell apart in the summer of 2012, the vault was short $215.5 million out of the more than $220 million in customer funds it claimed to hold. Thousands of traders who had entrusted the company with their deposits learned the scale of the catastrophe on the very same day the company's founder attempted to take his own life.

Peregrine Financial Group was founded by Wasendorf and, over the decades, grew into one of the country's leading independent futures brokers — a member of the National Futures Association (NFA) and a firm registered with the CFTC. Under industry rules, customer funds in futures accounts must be kept separate from the firm's operating funds — a basic requirement designed to protect traders in the event of problems at the company itself. PFGBest publicly demonstrated compliance with this requirement, regularly undergoing NFA and CFTC audits.

In reality, Wasendorf methodically circumvented this requirement for almost twenty years. He personally intercepted the balance-confirmation requests that NFA and CFTC auditors sent directly to the company's bank, changed the bank's correspondence address to a post-office box accessible to him alone, and then produced forged bank statements with inflated figures with his own hands and sent them back to the regulators. The scheme worked almost flawlessly for two decades because no external auditor ever once verified the data directly with the bank.

The reckoning came on 9 July 2012 — the same day the NFA reported that PFG was short at least $200 million in customer funds. Wasendorf attempted suicide near the company's office, survived, and left a suicide note confessing to the twenty-year fraud. The CFTC filed suit against him and the company, alleging fraud, misappropriation of customer funds, violation of account-segregation requirements and the provision of false information to regulators.

In September 2012, Wasendorf pleaded guilty to embezzling $215.5 million from more than 13,000 customers over nearly twenty years. In January 2013, the court imposed the maximum possible sentence — 50 years in prison — and ordered him to pay $215.5 million in restitution, although the judge immediately noted that the customers were unlikely ever to recover their money in full.

Published 5 November 2020