JPMorgan Accused in Suit of Failing to Protect Peregrine Fundsby
Former customers file lawsuit in N.Y. over their deposits
Peregrine filed for bankruptcy after millions stolen
JPMorgan Chase & Co. and a U.S. Bancorp unit failed to stop executives at now-defunct Peregrine Financial Group from stealing their funds on deposit, according to former customers who lost money in a $200 million swindle.
The customers sued the banks and others on Friday in the latest round of litigation stemming from the 2012 collapse of Peregrine. Peregrine, a futures trading firm based in Cedar Falls, Iowa, filed for bankruptcy after regulators discovered millions missing from the firm’s accounts. Its chief executive, Russell Wasendorf Sr., penned a confession before a failed suicide attempt. He was convicted of fraud and sentenced to 50 years in prison.
The customers said in a complaint in Manhattan federal court that JPMorgan transferred their funds from a segregated client account to a personal account of Wasendorf’s at U.S. Bank, a unit of U.S. Bancorp.
"The theft from the accounts at JPMorgan and U.S. Bank could not have occurred without the banks’ full cooperation and breaches of their legal duties," according to the complaint.
Dana Ripley, a spokesman for U.S. Bancorp, declined to comment on the suit. A spokesman for JPMorgan didn’t immediately return a message seeking comment.
U.S. Bank agreed last year to pay $18 million to end a regulator’s lawsuit over its handling of funds belonging to the Peregrine clients.
The customers said in the suit that they sought to recover their funds through an arbitration but had their claims denied.
The case is Behrens v. JPMorgan, 16-cv-05508, U.S. District Court, Southern District of New York (Manhattan).