Russell R. Wasendorf Sr.
|SEE: Original and aggregated coverage of the PFGBest scandal on JohnLothianNewsletter.com (July 2012)|
|Russell R. Wasendorf Sr.|
|Employer||Peregrine Financial Group|
|Location||Cedar Falls, IA|
Russell R. Wasendorf, Sr. was the chairman, chief executive officer and founder of PFGBEST.com (formerly Peregrine Financial Group), a privately held non-clearing futures commission merchant (FCM) and the publisher of SFO Magazine. The firm filed for bankruptcy in July 2012, after Wasendorf admitted to a massive fraud which cost investors $215 million. On January 31, 2013, he was sentenced to 50 years in prison for his role in the scandal.
Before his downfall, Wasendorf was active in the futures industry, which included a seat on the Futures Commission Merchant Advisory Committee of the National Futures Association (NFA). He has written six books about futures and commodities trading.
Timeline of the Fraud
On July 9, 2012, the firm distributed an internal memo which indicated that Wasendorf, Sr. may have attempted suicide. The firm froze client accounts and that same day, the National Futures Association (NFA) said Peregrine reported it had about $400 million in customer-segregated funds on or about June 29, of which $225 million was on deposit at U.S. Bank. The regulator was reportedly made aware that PFGBest's chairman “may have falsified bank records” after finding only $5 million was on deposit.
On July 10, 2012, the Federal Bureau of Investigation (FBI) confirmed it was involved in investigating the circumstances surrounding a $200 million shortfall in customer accounts discovered at a Chicago-based futures broker. Eventually it was confirmed that Wasendorf Sr. had attempted suicide on July 9 by piping auto exhaust into his car as he sat parked in it outside the firm’s Cedar Falls, Iowa, headquarters. Peregrine Financial filed for bankruptcy on July 10.
The NFA and the U.S. Commodity Futures Trading Commission took immediate action against the firm, sending it into bankruptcy. Wasendorf recovered and was charged with mail fraud, embezzlement and lying to regulators. He eventually pled guilty to those charges in a federal court in Iowa.  He said that he had acted alone in the fraud and that he had spent most of the missing money.
On July 16, 2012, the NFA said it would conduct a review of its audit division as it sought to react to criticism that it missed two decades of fraud at failed Iowa brokerage Peregrine Financial Group. Hours after a former customer of Peregrine Financial called for a U.S. congressional investigation of the NFA, the industry group said it was retaining outside law firm Jenner and Block to review its general practices and their execution in the case of PFGBest, as Peregrine was widely known. The Commodity Futures Trading Commission filed a lawsuit against Wasendorf and his firm, saying the CEO misappropriated more than $200 million in customer funds over several years. In testimony before the Senate Agriculture Committee, CFTC Chairman Gary Gensler acknowledged that the system had failed to protect PFG customers.
On September 17, 2012, Wasendorf pleaded guilty to stealing more than $100 million from its customers. The plea included embezzlement, mail fraud and two counts of lying to federal regulators.
On January 31, 2013, Linda Reade, Chief Judge of the Northern District of Iowa, sentenced Wasendorf to 50 years in prison. As of the time of the sentencing, 24,000 former customers are still missing money invested or held on deposit at PFG.
He has written the following books about futures and commodities trading:
- Commodity Trading: The Essential Primer (Dow Jones-Irwin, 1985) - ISBN 9780870942921
- All About Futures From The Inside Out (Probus Publishing Company, 1992) - ISBN 9781557382962
- All About Commodities From The Inside Out (Probus Publishing Company, 1992) - ISBN 978-1557384591
- All About Options From The Inside Out (Probus Publishing Company, 1993) - ISBN 9781557384348
- All About Managed Futures From The Inside Out (Probus Publishing Company, 1993)
- The Complete Guide To Single Stock Futures (McGraw-Hill, 2003) - ISBN 9780071434133
- Russell R. Wasendorf, Sr. - NFA ID 0049753
- Peregrine Financial Group, Inc. - NFA ID 0232217
- ↑ Wasendorf Gets 50 Years. Wall Street Journal.
- ↑ Peregrine Financial's Wasendorf sentenced to 50 years in jail. Reuters.
- ↑ Peregrine Investigated Over Missing Money After Suicide Attempt. Bloomberg.
- ↑ Peregrine Financial Group brokerage said to be $220 million short in customer funds. CBS.
- ↑ FBI investigates Peregrine Financial. FT.com.
- ↑ Peregrine's Wasendorf Pleads guilty to Embezzlement, Fraud. Bloomberg.
- ↑ Court Accepts Peregrine Financial CEO's Guilty Plea. WSJ.com.
- ↑ http://jlne.ws/OavagA Peregrine Founder Says He Spent Most of Missing Money. WSJ.com.
- ↑ PFGBest regulator orders review of audit division. Yahoo! News/Reuters.
- ↑ CFTC chief admits failure in oversight of Peregrine. Chicago Tribune.
- ↑ Peregrine’s Wasendorf Pleads Guilty to Embezzlement, Fraud. Bloomberg.
- ↑ Iowa Brokerage Head Gets 50 Years for Embezzlement. Time.