9. PFG's Less Than Best
(Originally published July 13, 2012)
Somebody find Jon Corzine and tell him he has company.
Futures broker PFGBest imploded Tuesday after the Commodity Futures Trading Commission accused it of misappropriating customer funds for over two years. The regulator alleges that the firm's Peregrine unit and its owner Russell Wasendorf Sr. tapped into thousands of customer accounts to hide a shortfall that may exceed $200 million. Peregrine filed for Chapter 7 bankruptcy Tuesday night.
"The whereabouts of the funds is currently unknown," the CFTC said in a complaint against PFG and Wasendorf, whose suicide attempt Monday night kicked off the crisis.
Yep, even after
went bust under Corzine's watch last autumn, leaving $1.6 billion in unaccounted client cash, it took an embezzler trying to off himself for the authorities to uncover the fraud at the Cedar Falls, Iowa-based broker.
Seriously guys, just because PFGBest is stuck in corn country doesn't mean it's not crooked. One would think that after the MF debacle you folks would have kicked a few tires to make sure other futures firms were on the up and up, but maybe Iowa is fly-over territory for you folks.
To be fair, however, regulators missed Bernie Madoff's scam and he was operating right under their noses on the tony Upper East side of Manhattan, so inept officials and the swindlers they chase clearly know no bounds.
And like Madoff's scam, Wasendorf's swindle should have been easy to spot considering how simple it was in nature. According to Reuters, Wasendorf used a phony post office box to intercept confidential regulatory documents that were mailed by the National Futures Association, his regulator, to what they believed was PFGBest's bank.
Once he had the papers in hand, Wasendorf (1) forged the necessary signatures, (2) manipulated the bank balances, (3) mailed the altered information back to the Chicago-based NFA and (4) went on his merry way.
Simple as pie. Can of corn if you will. That is, until the NFA switched to electronic confirmations and Wasendorf -- who was breathing but incapacitated at last check -- lost his ability to continue his con game. Ah, thank heaven for technology for shining a light on the criminals among us.
That said, the fact that Wasendorf was able to keep his crime going as long as he did using nothing but a P.O. box and a pen will certainly frighten off traders now on the fence about jumping into the futures markets.
The ones not already scared away by Corzine's malfeasance at MF Global that is.