CEDAR FALLS, IA – U.S. Bank National Association has been ordered to pay $18 million in restitution to customers of the now-defunct Peregrine Financial Group, Inc., following a ruling by Chief Judge Linda R. Reade of the U.S. District Court for the Northern District of Iowa on February 4, 2015. The judgment stems from the massive fraud perpetrated by Russell Wasendorf, Sr., Peregrine’s owner, who misappropriated over $215 million from more than 24,000 clients.
While Wasendorf was criminally convicted and sentenced to 50 years in prison on January 23, 2013, the CFTC investigation revealed that U.S. Bank, which maintained branch offices in Cedar Falls, Iowa, failed to adequately safeguard customer funds held in a segregated account. Between June 2008 and July 2012, Wasendorf was able to withdraw approximately $36 million from the account for purposes unrelated to Peregrine customers.
The CFTC’s complaint, filed on June 5, 2013, alleged that U.S. Bank treated the segregated funds account like a standard business checking account, allowing Wasendorf to illicitly access customer money. The court found that U.S. Bank also routinely deducted account fees from the segregated funds for both Peregrine and non-Peregrine accounts.
The consent order permanently enjoins U.S. Bank from violating the Commodity Exchange Act and CFTC regulations regarding the handling of customer funds. Specifically, the bank is prohibited from holding, disposing of, or using customer funds as if they were its own, or extending credit based on those funds to anyone other than the rightful owners.
“Russell Wasendorf stole enormous sums of money that Peregrine’s customers entrusted to him,” stated CFTC Director of Enforcement Aitan Goelman. “He is responsible for his crimes. However, that fact does not excuse U.S. Bank’s failure to meet its own responsibilities to safeguard Peregrine’s customer funds that it held.” The $18 million payment will be distributed to Peregrine customers who held domestic futures accounts through the court-appointed trustee in the bankruptcy case.
Source: CFTC.gov
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