Russell Wasendorf Sr., the chief executive officer of bankrupt futures brokerage Peregrine Financial Group Inc. facing criminal charges, was sued by a customer claiming the CEO and his son illegally commingled firm and client money.
U.S. regulators sued the Cedar Falls, Iowa-based firm and Wasendorf Sr. in federal court in Chicago on July 10 alleging they misappropriated at least $200 million in client money.
Michael LaSalvia of Naperville, Illinois, in a complaint filed in the same courthouse July 13, seeks class-action, or group, status on behalf of anyone who had money on deposit with Peregrine from January 2010 to July 10, 2012.
“It is a bedrock principal of regulation” that a futures commission merchant such as Peregrine, which accepted client orders for the purchase and sale of commodities for future delivery, “is not allowed to commingle funds helds in customer accounts with its own funds in any circumstances,” LaSalvia alleged.
Russell Wasendorf Jr., who served as Peregrine’s chief operating officer, and two other executives are named as co- defendants in the complaint, which seeks unspecified money damages for alleged violations of the U.S. Commodity Exchange Act.
Wasendorf Sr., 64, is charged criminally with making false statements to Commodity Futures Trading Commission regulators about how much client money the firm had on deposit. Jane Kelly, a federal public defender representing Wasendorf Sr. in the criminal case, declined to comment on the lawsuit.
Found with him in his car was a signed statement in which he said he’d been stealing from the firm for about 20 years, according to an affidavit by Federal Bureau of Investigation Special Agent William Langdon filed with the criminal complaint.
Wasendorf Sr., who is being held in U.S. custody pending a bail hearing on July 18, admitted to stealing at least $100 million, according to Langdon.
The firm filed for liquidation under the U.S. Bankruptcy Code on July 10, listing more than $500 million in assets and more than $100 million in liabilities.
The case is LaSalvia v. Wasendorf, 12-cv-05546, U.S. District Court, Northern District of Illinois (Chicago). The criminal case is U.S. v. Wasendorf, 12-mj-131, U.S. District Court, Northern District of Iowa (Cedar Rapids).
The bankruptcy case is In re Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The regulatory case is U.S. Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-05383, U.S. District Court, Northern District of Illinois (Chicago).
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