CNBC reports that unidentified sources claim that PFG Best CEO, Russell Wasendorf, is awake and responsive. Authorities announce that he has been placed under arrest for making false statements to the CFTC.

From CNBC:

“CEDAR FALLS, Iowa — Russell Wasendorf, the founder and CEO of failed trader Peregrine Financial Group, has been arrested, CNBC has learned.

He has been charged with making false statements to the Commodity Futures Trading Commission relating to the value of customer segregated funds at PFG beginning back in 2010 and continuing until July 2012.

“I have committed fraud,” Wasendorf said in a signed statement, according to the criminal compliant. Wasendorf also said he forged bank statements for 20 years.”

Russell Wasendorf’s suicide note, hat tip Zero Hedge:

“I have committed fraud. For this I feel constant and intense guilt…

The forgeries started nearly twenty years ago…

Should I go out of business or cheat…

I guess my ego was too big to admit failure…”

Additional details here.

Ann Barnhardt has been involved professionally in the futures industry for some time and was hit hard by the collapse of MF Global. She has been on a mission ever since and I applaud her. The industry is broken and needs some legitimate attention. Fortunately, it seems the PFG Best failure has reignited her passion in digging up dirt. From Ann via Jesse Cafe Americain:

“The National Futures Association needs to be sued into the ground by all of the PFGBest customers, as well as many of the NFA employees PERSONALLY.

In 2010 I was audited by the NFA, which is a bi-annual (every two years) occurrence for Independent Introducing Brokers. The NFA tried to tell me that a commercial hedge broker could not execute more than one round-turn per client per cash inventory cycle.

Yes, I kid you not. They actually tried to make that argument. As in a feedlot or rancher who is hedged with short futures and has a big open profit on the hedge MAY NOT exit that short futures and buy puts in order to manage that position. Or, if a hedger has an option position that has a big open profit, the hedger may NOT roll that option position into a different strike price in order to capture equity and protect against time value erosion.

The NFA actually tried to argue that it is against the law for a hedge broker to transact more than one round-turn per cash commodity inventory cycle. Again, I can’t make this crap up. I have all of their stunningly ignorant letters to prove all of this.

But here is the point, and anyone out there who is a PFGBest customer or an attorney representing a PFGBest customer needs to listen up:

The same “Senior Compliance Manager” who signed off on the PFGBest affadavit and who is listed on the NFA website as both the “Director of Audits/Investigations” and the “Director of FOREX Compliance”, Lauren Brinati, is the same woman whom I and my attorneys dealt with two years ago.

Now, hold on to your pantyhose.

One of my attorneys in the Schuyler Roche Crisham firm in Chicago, as livid as I was by the NFA’s galactically stupid contention about hedgers being limited to one round-turn per cash inventory cycle, called Lauren Brinati to discuss the NFA’s position. Lauren Brinati said that she couldn’t discuss the matter with my attorney directly because:

“I don’t actually understand any of this stuff. I just sign whatever comes across my desk.”
Lauren Brinati, June 2010″

I encourage you to read this post in its entirety. There needs to be a catalyst to force change within the  futures industry as a whole. Let’s hope the combination of PFG Best and MF Global will suffice.

Although it may be nice to read what Ann and Attain Capital write, there simply needs to be action. Hopefully a legitimate lawsuit can be brought on parties that have hurt the industry as a whole. I look forward to watching this unfold.

From what I hear, our May 2012 ratings report on Zero Hedge has created quite a stir in the industry. Let’s hope this is just the beginning of positive material changes.

Here is what we know over the last several hours:

Russ Wasendorf Sr., the CEO and founder of PFG Best attempted suicide this morning in his car and failed. He is in critical condition at a local university hospital

PFG Best identified “accounting irregularities” in the banking records.

The NFA (National Futures Association) has effectively shut down PFG Best, enabling liquidations only. Accounts are frozen and withdrawals are not possible at this time.

The NFA inquired to the segregated funds held at a U.S. bank (JP Morgan) as there was a ~$220mil discrepancy (PFG Best has approximately $400 mil in client funds). PFG stated that about $225mil was held at their U.S. Bank, when in reality only $5mil was held in the customer segregated account.

What did we know before today that enabled Atlas Ratings to identify PFG Best in the BOTTOM 5% of all FCMs (only 4 FCMs ranked below PFG Best on our proprietary rating scale).

Almost across the board, PFG Best lagged dramatically in most categories. The only category where they did not have low marks was in regard to exchange penalties. The commodity exchanges had not penalized PFG very often for their clearing procedures or floor recordkeeping, that much was done adequately within the company.

Everything else we monitor showed weakness within the company:

Their net capital ratio and the trend of that ratio was extremely weak.

Their business is not diversified, they rely on minimal interest revenue, commissions and any proprietary trading.

Customer assets growth has been weak, healthy companies attract and retain new accounts.

PFG Best has had many CFTC & NFA penalties, these are major red flags. They failed to ID a massive ponzi scheme to the tune of $195mil that was “trading” through PFG Best.

Customers have engaged in arbitration with PFG Best and won. The NFA has sided with customers in numerous occasions in regard to disputes. In all of these situation, PFG Best was required to reimburse or pay their past customers for damages.

PFG Best looks to be the next MF Global. Atlas Ratings has PFG Best (Peregrine Financial Group) in the BOTTOM 5% of all FCMs in operation. Only three FCMs rank below PFG Best.

Our clients had the information to avoid PFG Best.

Russell Wasendorf has attempted suicide (unsuccessfully we assume) and the company has found some “accounting irregularities”. If history is any indication this will mean fraud.

The NFA will have information on their website this evening and you can call to submit your email address for current information.

The NFA has shut down PFG Best and they are in liquidation mode only. They have frozen funds and not releasing any money back to clients at this stage.

We encourage you to take a hard look at your current FCM and do the necessary research to ensure that this won’t happen to your broker down the road. Atlas Ratings successfully identified MF Global as exceedingly high risk and also identified PFG Best as extremely high risk as well.

Monday, July 9, 2012

Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts.  PFGBEST is wholly owned by Mr. Wasendorf.  Therefore, the NFA and other officials have put all funds on hold, and PFGBEST is in liquidation-only status with our clearing FCM.  What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds.  We will update you as any new procedures are stipulated and with any further information as it becomes available.

http://www.zerohedge.com/news/futures-brokerage-pfg-best-freezes-accounts-following-discovery-accounting-irregularity