A district court issued a Consent Order placing a permanent injunction against the U.S. Bank National Association and mandating that the bank return $18 million to customers of Peregrine Financial Group, Inc. customers.
US Bank has offices in Iowa where Peregrine, a non-bank, nonclearing FCM (Futures Commission Merchant), and its owner Russell Wasendorf were based. Peregrine was also The bank was the depository for the non-bank and it held an account for customer-segregated funds that Wasendorf accessed when bilking over 24,000 clients. Some $215M was misappropriated.
In July 2012, the Commodity Futures Trading Commission put out a civil action against Peregrine and Wasendorf. The latter has pled guilty to criminal charges and received a 50-year sentence. He also has to pay over $215M in restitution.
The CFTC’s action is related to the period of 6/08 through 7/12 when Wasendorf took out and moved about $36M from the US Bank account to entities and persons that were not customers of Peregrine. The U.S. bank received fees from the account.
Per the order, US banks cannot commit future violations of the Commodity Exchange Act and CFTC Regulations. They don’t let depository institutions hold, get rid of, or use money that belong to futures commission merchant customers as if the funds belonged to anyone else.
The $18 million will go to Peregrine’s trustee, who can then give the money back to the customers who were affected.
CFTC Enforcement Director Aitan Goelman noted that while it was Wasendorf who stole the money from customers of Peregrine, this does not exempt the bank from its own duty to keep the money of Peregrine customers safe.
Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.
Federal Court Orders U.S. Bank National Association to Pay $18 Million to Peregrine Customers, CFTC, February 4, 2015
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