The Peregrine Financial Group Inc.trustee didn’t complete necessary tests before announcing a plan to distribute $123 million to customers of the defunct futures brokerage, the U.S. Commodity Futures Trading Commission said.
The tests were essential because Peregrine collapsed amid a fraud and theft of money by founder Russell Wasendorf Sr., the CFTC said in a filing yesterday in U.S. Bankruptcy Court in Chicago.
“The CFTC is in favor of distributing money to the debtor’s customers as soon as is reasonable and practicable,” the regulator said. “Because this case involves allegations of fraudulent books and records of the debtor’s estate, however, the CFTC believes that distributions should be made only after reasonable due diligence to ensure that the data underlying the distribution are reliable.”
Peregrine filed for Chapter 7 liquidation on July 10, hours after the CFTC filed a lawsuit accusing the firm and Wasendorf of misappropriating more than $200 million in customer funds.
The CFTC said it had consulted with the trustee, Ira Bodenstein, about methods for performing validity tests of commodity customer accounts, to ensure money didn’t go to any claimant who may have been involved in the theft of customer money.
