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Peregrine Trustee Says 11 Clients Have Returnable Assets

Wasendorf Dream Building Languishes After Collapse
Finding a buyer for the Peregrine Financial Group Inc. building will be a challenge in a small market that already has several office properties for sale. Photographer: Justin Torner/Bloomberg

July 18 (Bloomberg) -- The trustee liquidating Peregrine Financial Group Inc. said only about 11 of 24,000 futures customers have “specifically identifiable property” eligible to be returned to them.

Peregrine founder Russell R. Wasendorf Sr., 64, admitted stealing at least $100 million from the Cedar Falls, Iowa-based firm, according to an FBI affidavit accompanying a criminal complaint unsealed upon his July 13 arrest. The National Futures Association reported July 9 that Peregrine appeared to be missing at least $200 million in client funds. Wasendorf attempted suicide outside the firm’s headquarters that day.

The trustee, Ira Bodenstein, said the assets he is seeking to return are defined as securities, warehouse receipts, cash and other assets that are registered in customers’ names and aren’t transferable. The 11 eligible customers mostly hold warehouse receipts for precious metals, he said in a court filing in U.S. Bankruptcy Court in Chicago.

According to U.S. rules for liquidating a futures brokerage, other customer property must be distributed pro rata based on net equity claims. Commodity contracts that can’t be traced to a particular customer will be liquidated, along with securities and other assets held by the firm’s estate that don’t fit the definition of specifically identifiable property.

Metals Receipts

As a result, customers of the futures brokerage who have a right to return of property won’t necessarily get 100 percent of their assets, Bodenstein said.

Bodenstein didn’t immediately return a call seeking comment on the outlook for Peregrine’s remaining customers. An e-mail said he was out of the office.

Wasendorf established the firm as Wasendorf & Son Inc. in 1980, renamed it Peregrine 10 years later and opened a Chicago office, according to its website. The firm filed to liquidate in Chapter 7 bankruptcy on July 10.

Customers with returnable metals warehouse receipts may have to post a deposit to receive the receipts, he said. Notices letting eligible customers know they must request return of property will be sent in writing to those customers, he said.

The bankruptcy case is In re Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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