Peregrine Financial Group Inc.’s Chapter 7 liquidation trustee can operate the firm until at least Sept. 13, a U.S. Bankruptcy Court judge said.
Judge Carol A. Doyle in Chicago issued the ruling today after Robert Fishman, a lawyer for Trustee Ira Bodenstein, said his client needed time and a number of critical employees to complete work that was in progress when the firm sought bankruptcy protection on July 10.
There were “numerous transactions in the middle of being executed” when the bankruptcy filing was made, Fishman said. Without the requested time and retained staff it would be “simply impossible” to accurately assess the firm’s holdings and figure out who they belong to, he said.
Peregrine, based in Cedar Falls, Iowa, with offices in Chicago, filed for bankruptcy a day after the National Futures Association said it identified a shortfall of about $200 million in customer funds on deposit.
Its bankruptcy petition lists more than $500 million in assets and more than $100 million in liabilities. The broker estimates it has more than 10,000 creditors, according to the filing.
Russell Wasendorf Sr., the firm’s founder and chairman, was arrested today on a charge of making false statements to federal regulators, U.S. Attorney Stephanie Rose in Cedar Rapids, Iowa, said. He is due to make an initial appearance before a federal magistrate judge there later today.
On July 9, Wasendorf was found by employees semiconscious in his car outside the Cedar Falls office, having attempted suicide by piping exhaust fumes into a car’s passenger compartment, according to the Black Hawk County sheriff’s department report. He was hospitalized immediately.
Found with him was a signed statement in which the founder said he’d been embezzling Peregrine funds for two decades, according to an affidavit by Federal Bureau of Investigation Special Agent William F. Langdon filed in court with the criminal complaint.
The U.S. Commodity Futures Trading Commission sued Peregrine and Wasendorf in federal court in Chicago on July 10, alleging they misappropriated client funds and that at least $200 million was unaccounted for.
U.S. District Judge Rebecca Pallmeyer in Chicago appointed attorney Michael Eidelman as receiver for the business and for Wasendorf.
Randall Lending, a lawyer for Eidelman, appeared at today’s hearing. Afterward, he said he had no new information about Wasendorf’s condition except that the Peregrine founder was “still incapacitated.”
Late yesterday, Bodenstein’s lawyer filed papers with Doyle seeking permission for the trustee to temporarily run the firm with 57 key employees. It had a staff of 241 before the bankruptcy.
“He needs to operate this business for a while,” Fishman told the judge, explaining Bodenstein wouldn’t solicit new customers or engage in trading.
Doyle called the trustee’s proposal a “logical route” to follow and granted the request without opposition.
The bankruptcy case is 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-5383, U.S. District Court, Northern District of Illinois (Chicago).