July 19 (Bloomberg) -- Peregrine Financial Group Inc.’s bankruptcy trustee will tell some former clients within 14 days about how much they have to put on deposit so they can redeem specific property claims against the defunct futures brokerage.
Robert Fishman, a lawyer for the trustee, today told U.S. Bankruptcy Judge Carol Doyle in Chicago that the preliminary estimate -- a percentage of the properties’ value -- was needed as a guide for processing 11 potential claims, primarily from owners of warehouse receipts for precious metals held by the collapsed Cedar Falls, Iowa-based firm.
“We’ll be pretty conservative,” Fishman told reporters after the hearing, in which Doyle gave the trustee permission to notify the clients about their property. The notices will be sent today by overnight mail, Fishman said in an interview.
Clients will have 14 days from when they are notified to say whether they want to reclaim that property, mostly warehouse receipts for precious metals. Because claimants in the same class must be treated equally, each one seeking the return of property must deposit a percentage of its cash value, to be held for ultimate pro rata distribution to claims class members.
The percentage estimate will apply for now only to members of this group, Fishman said.
Peregrine filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on July 10, one day after the National Futures Association, an industry self-regulator, said the firm’s bank accounts were short more than $200 million.
Russell Wasendorf Sr., Peregrine’s founder and chief executive officer, has been charged with making false statements to the U.S. Commodity Futures Trading Commission. He’s in federal custody pending a bail hearing set for July 27 in Cedar Rapids, Iowa.
The trustee, Ira Bodenstein, notified the court July 17 of 11 of about 24,000 futures customers with specifically identifiable property eligible to be returned to them. Bodenstein was chosen by the U.S. Trustee’s Office, the Justice Department arm that oversees bankruptcy cases.
“This is just the first bucket we’re dealing with,” Fishman told the judge today. “There’s lots more buckets to come.”
The trustee’s office is establishing a website, Bodenstein said outside the court, at www.pfgchapter7.com, as well as a toll-free phone line for making inquiries at 877-465-1849.
Two Peregrine clients separately have sued Wasendorf and other company executives in federal court in Chicago, accusing the firm of breaching provisions of the federal Commodity Exchange Act.
One of those customers, Michael LaSalvia of Naperville, Illinois, today asked U.S. District Judge Sharon Johnson Coleman to consider granting group status to all current and former firm clients whose deposited money was commingled with firm funds.
Johnson is scheduled to hear arguments on the request on July 31.
The bankruptcy case is In re Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).
The criminal case is U.S. v. Wasendorf, 12-mj-00131, U.S. District Court, Northern District of Iowa (Cedar Rapids).
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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