PFG freezes accounts, CEO attempts suicide

[ForAPlus]

Um...

"Wasendorf intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry group believed was U.S. Bank, PFG's bank, a person close to the situation told Reuters. Instead, they were sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said, who declined to be identified."

So the guy went out of his way to be a criminal. And CTFC ultimately did figure it out;

Look, no one is saying the regulators are perfect (they clearly are not). But criminals will be criminals.

No need to blast a whole country and its people for it.

Read more: http://www.foxbusiness.com/industri...deals-blow-to-futures-industry/#ixzz20JuYNMFg

Quote from zboy2854A:

Stop being an ignoramus. Far more American investors have gotten hurt in this than foreign ones. Should we Americans stop trading American markets as well?

This has nothing to do with "due diligence", this isn't how "the business works". This was FRAUD that the regulatory entities were supposed to be on the job to prevent. No amount of private investor "due diligence" would have alerted you to the fact that the guy running the brokerage your money is with was forging documents and stealing money.

So please shut up if you don't understand what actually happened here. Thank you.

 

[brocklanders]

Quote from ForAPlus:

Um...

"Wasendorf intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry group believed was U.S. Bank, PFG's bank, a person close to the situation told Reuters. Instead, they were sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said, who declined to be identified."]

This is actually not what happened apparently. The NFA knew that the documents were not coming directly from the bank. He didn't intercept anything... they mailed to an address he provided and astoundingly knew that it wasn't connected with the bank at all. In recent weeks the NFA was asking to get documents or electronic verification from the bank directly. So there you have the American regulatory system in a nutshell. Where was the bank in all of this also? Did U.S. Bank have no clue that they were supposed to be holding 200MM and only hold 5MM? Is everyone on the take or just completely clueless??

 

[zboy2854A]

Quote from ForAPlus:

Um...

"Wasendorf intercepted confidential regulatory documents that were mailed by the National Futures Association to what the industry group believed was U.S. Bank, PFG's bank, a person close to the situation told Reuters. Instead, they were sending the documents, used to independently verify a broker's bank balances, to a post office box that Wasendorf had set up, the source said, who declined to be identified."

So the guy went out of his way to be a criminal. And CTFC ultimately did figure it out;

Look, no one is saying the regulators are perfect (they clearly are not). But criminals will be criminals.

No need to blast a whole country and its people for it.

Read more: http://www.foxbusiness.com/industri...deals-blow-to-futures-industry/#ixzz20JuYNMFg

I agree with that. What I don't agree with was your original premise that this was somehow a normal risk of doing business in the U.S. markets, or that somehow he didn't do his own "due diligence". Again, there is no due diligence an individual investor could have done that could have predicted this outcome.

 

[GTS]

Quote from brocklanders:

This is actually not what happened apparently. The NFA knew that the documents were not coming directly from the bank. He didn't intercept anything... they mailed to an address he provided and astoundingly knew that it wasn't connected with the bank at all.

Do you have a cite for that? Everything I've read implied that the NFA did think they were mailing US Bank directly at the fake PO box that PFG provided to them.

Quote from brocklanders:
Where was the bank in all of this also? Did U.S. Bank have no clue that they were supposed to be holding 200MM and only hold 5MM?

How could US Bank know what balance PFG should have with them?

 

[brocklanders]

Quote from GTS:

Do you have a cite for that? Everything I've read implied that the NFA did think they were mailing US Bank directly at the fake PO box that PFG provided to them.

"The scheme apparently began to unravel after the NFA began to press Wasendorf, who was an early advocate of electronic trading, to allow the regulator to confirm balances electronically and directly with the bank, rather than in a hard copy via mail, the person said."

This statement implies they (the NFA) knew they were not dealing with the bank. It defies logic how they could have thought they were so this actually makes sense and explains how Wasendorf was able to perpetrate the fraud for over two years. The NFA turned a blind eye and bears much responsibility for this.

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

Quote from GTS:


How could US Bank know what balance PFG should have with them?

The CFTC produces a report every month called "Financial Data for FCMs". That should have been a good starting point.

 

[GTS]

Quote from brocklanders:
"The scheme apparently began to unravel after the NFA began to press Wasendorf, who was an early advocate of electronic trading, to allow the regulator to confirm balances electronically and directly with the bank, rather than in a hard copy via mail, the person said."

This statement implies they (the NFA) knew they were not dealing with the bank.

I guess I'm reading it differently - that says to me that they wanted to confirm it electronically rather than going through the mail, not that they were aware he was acting as a go-between previously. I agree it could be interpreted the way you stated.

Edit: I noticed the reports mentioned the NFA documents were addressed to the bank and not PFG/Wasendorf - if they knew they were sending it to him why wouldn't they address them as such?

"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."

Quote from brocklanders:
The CFTC produces a report every month called "Financial Data for FCMs". That should have been a good starting point.

How would US Bank know that PFG didn't also keep customer funds in other banks as well? Does the report you reference specifically break-out where the funds for each FCM are kept, e.g. is there a US Bank line for PFG?

 

[ForAPlus]

The guy said he "MANAGED trading account"; So I assume (perhaps wrongly) that he's not some random retail guy opening a brokerage account.

If he's a CTA or an advisor, then he has a duty to perform due diligence on his counterparties. It's a part of being a professional - which includes not parking excessive cash over margin requirements at a relatively small broker

Quote from zboy2854A:

I agree with that. What I don't agree with was your original premise that this was somehow a normal risk of doing business in the U.S. markets, or that somehow he didn't do his own "due diligence". Again, there is no due diligence an individual investor could have done that could have predicted this outcome.

 

[GTS]

Quote from ForAPlus:

The guy said he "MANAGED trading account"; So I assume (perhaps wrongly) that he's not some random retail guy opening a brokerage account.

Actually he said he had a managed account which sounds like an account managed by someone else, not him doing the managing:

"I have a MANAGED trading account cleared through PFG"

 

[brocklanders]

Quote from GTS:

How would US Bank know that PFG didn't also keep customer funds in other banks as well? Does the report you reference specifically break-out where the funds for each FCM are kept, e.g. is there a US Bank line for PFG?

Well there usually one main bank that is included in the account opening forms where incoming initial deposits go. My question is what the hell does segregated funds mean if there is no oversight from the bank holding a seg fund account. Did U.S. Bank never question why Wasendorf used the account like it was his own money?

I'd be curious if anyone still has access to a PFGBest account authorization form if the U.S. Bank account was where customers wired in money. I'd bet almost certainly it was and U.S. Bank has some liability in this also.

 

[zboy2854A]

Quote from ForAPlus:

The guy said he "MANAGED trading account"; So I assume (perhaps wrongly) that he's not some random retail guy opening a brokerage account.

If he's a CTA or an advisor, then he has a duty to perform due diligence on his counterparties. It's a part of being a professional - which includes not parking excessive cash over margin requirements at a relatively small broker

And again I ask, exactly what "due diligence" can someone do to know that the CEO of the brokerage has been falsifying bank statements and lying to regulators, and the regulators have been asleep at the switch? How does being a CTA or advisor give someone any greater ability to know that this sort of hidden criminal activity is going on?

I say again, there is no "due diligence" anyone besides the regulators could have done in this situation to have known that the CEO was stealing money and falsifying documents. That was what the NFA was supposed to be there for. Blaming the victims in this case doesn't hold water.