PFG freezes accounts, CEO attempts suicide

[bone]

Quote from billyjoerob:

but it's too flip to say that tighter regulation might not have helped the futures merchants and more importantly the customers.

Nope, swing and a miss. How about the freaking regulators not taking account balances at face value from the entities supposedly being regulated ? How is it that a government bureaucracy with a $200M annual budget cannot verify with the bank supposedly holding the segregated funds what the FCM claims in its' regulatory filings ? How fundamentally simple is that...

Why should we insure something as taxpayers when the smarter, more efficient, more honest way of doing things correctly is for a government auditor to actually do their jobs correctly in the first place ? Why should taxpayers subsidize more government incompetence when you have a $120K per year government accountant with a ridiculous pension and benefits plan that is too lazy or inept to check the FCM's figures against the bank account balance ?

 

[comintel]

It seems that some people were aware that this was about to happen and got out:

http://video.foxbusiness.com/v/1729054564001/

(interview with Phil Flynn)

 

[swingtrader123]

It seemed that PFGBest was a Ponzi scheme after all. Wasendorf was intercepting the NFA bank statement requests. It was only when the NFA requested electronic verification that the scheme fell apart. See full store at
http://www.reuters.com/article/2012/07/10/us-broker-pfgbest-document-idUSBRE8691F520120710

 

[denner]

Quote from bone:


Why should we insure something as taxpayers when the smarter, more efficient, more honest way of doing things correctly is for a government auditor to actually do their jobs correctly in the first place ? Why should taxpayers subsidize more government incompetence when you have a $120K per year government accountant with a ridiculous pension and benefits plan that is too lazy or inept to check the FCM's figures against the bank account balance ?

Exactly! How MANY auditors does it take to simply verify the balances directly with the bank holding the customer segregated funds? If the guy assigned to this particular FCM is too incompetent to do the job, then hiring 5 more guys that are just as incompetent doesn't solve a f'ing thing.

We have the rules and regulations to prevent this sort of stuff, but it sure as hell doesn't seem that we have the personnel to implement it. Sounds alot like many other sectors of this economy, to be honest...

 

[denner]

Quote from swingtrader123:

It seemed that PFGBest was a Ponzi scheme after all. Wasendorf was intercepting the NFA bank statement requests. It was only when the NFA requested electronic verification that the scheme fell apart. See full store at
http://www.reuters.com/article/2012/07/10/us-broker-pfgbest-document-idUSBRE8691F520120710

Honestly, that sounds like something a guy could get away with in 1982, not 2012. Truly pathetic that such a shoddy scam could cause another major blow to the industry.

 

[Banjo]

Quote from swingtrader123:

It seemed that PFGBest was a Ponzi scheme after all. Wasendorf was intercepting the NFA bank statement requests. It was only when the NFA requested electronic verification that the scheme fell apart. See full store at
http://www.reuters.com/article/2012/07/10/us-broker-pfgbest-document-idUSBRE8691F520120710

Doesn't the bank have an address."Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank." We're living in a cartoon. Un freaking believable.

 

[Trendytrader]

This is my key takeaway as well. With all of the ability to toss data around these days, how they could have missed requiring the banks to supply that data directly is beyond me. Obviously, whatever costs the banks incur would ultimately be passed on to the account holders, but who cares? That's a cost I'd be glad to help defray if it means more objective reporting of bank assets. [/QUOTE]

The answer is below:

http://www.reuters.com/article/2012/07/10/us-broker-pfgbest-document-idUSBRE8691F520120710

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution.

Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week.

Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank.

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.

Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said.

 

[justrading]

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.

If true this more than warrants an investigation of the NFA.

 

[logic_man]

Quote from Trendytrader:



The answer is below:

http://www.reuters.com/article/2012/07/10/us-broker-pfgbest-document-idUSBRE8691F520120710

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution.

Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week.

Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank.

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.

Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said.

Looks like the verification of the physical mailing address was the point where the process broke down.

Not sure how the NFA could have known that address was fake. Still, they should have gamed out scenarios whereby fraud could occur and flagged that step of the confirmation process. The guy was clearly a motivated criminal taking advantage of a process loophole.

 

[logic_man]

Quote from justrading:

If true this more than warrants an investigation of the NFA.

What do you investigate them for? Not being able to anticipate how someone could use a process loophole to commit fraud?

I suppose that is some kind of negligence, but other than fixing it after the fact (it appears they were in the midst of fixing it with the electronic confirmations), what can be done? Hundreds of other companies used the same process and didn't commit fraud (it would appear), so can you really blame the process?

I'm not defending the NFA, although I'm sure their defense would start off with a statement along these lines.