Welcome to Capital Account. More than $200 million in customer money is allegedly missing from the accounts of one of the largest, non-clearing, US futures commission merchants, PFG Best. That's according to regulators. The money was supposed to be in segregated customer accounts. Customers have been told their money is frozen. Does this sound oddly familiar? We will hear from two PFG Best customers, Christopher Olson and Mohamed Hawary.
And there is evidence PFG Best may have been committing fraud with falsified statements for years, according to regulators. The FBI is investigating, the CFTC is alleging fraud, but why did regulators miss this? We'll talk about what this shortfall means for investor confidence when a regulated broker can get away with this undetected for years.
And this is not the first time sacrosanct segregated customer funds have gone missing. MF Global went bankrupt less than a year ago taking $1.6 billion in customer money with it. We talk to a man fighting for MF Global customers about why he is having deja vu in the wake of this PFG news. John Roe, co-founder of the Commodity Customer Coalition, joins us.
As for some of the details into the PFG complaint, the National Futures Association (NFA), the broker's first line regulator, discovered during an audit that a US bank account PFG reported was holding $225 million in customer accounts contained only $5. The NFA also alleges the $207 million balance reported in February 2010 and the $208 million balance reported in March 2011, were falsified. PFG's actual balances at those times was less than $10 million for each of the months.
The CFTC, the Commodities Future Trading Commission, filed a complaint against Peregrine Financial Group (or PFG) and its owner Russell Wasendorf. The CFTC alleges fraud by misappropriating customer funds, violating customer segregation laws, and making false statements in financial statements.
- PFG Best and MF Global Stain the Futures Industry, and Hurt Your Pocketbook, Jeff Carter, Points and Figures
- PFG Is Now MFG(lobal) Part 2 As $220 Million In Segregated Client Money Has Just Vaporized, Tyler Durden, Zero Hedge
- MF Global Customer Representative: PFG Situation Proves The Retail Futures Industry Is In Disrepair, Rob Wile, Business Insider