PFG customers clamber to sell claims at 25 cents or less

PFG customers clamber to sell claims at 25 cents or less
Quotes of 22 cents on the dollar to 25 cents were given to half a dozen Peregrine customers who called CRT Capital Group LLC, which buys and sells distressed debt.
SEP 18, 2012
Customers' claims on Peregrine Financial Group Inc., whose founder is accused by regulators of misappropriating more than $200 million, may fetch less than a quarter of their value in the wake of the firm's bankruptcy, a trader said. Quotes of 22 cents on the dollar to 25 cents were given to half a dozen Peregrine customers Wednesday who called CRT Capital Group LLC, which buys and sells distressed debt, said Joseph Sarachek, managing director of claims trading. He is being “deluged” by calls, he said. By comparison, bankrupt MF Global Inc.'s U.S. claims have always sold in the high 70s, he said. Peregrine filed for bankruptcy July 10 after the U.S. Commodity Futures Trading Commission sued alleging the brokerage and its founder, Russell Wasendorf Sr., “used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds.” False reports on customer funds were also filed with the CFTC, the regulator said. “This is much messier than MF Global because it appears there is fraud involved, based on the CFTC complaint,” Sarachek said. Wasendorf, 64, tried to asphyxiate himself July 9 in the parking lot of Peregrine's offices near a country club in Cedar Falls, Iowa, police say. A judge ordered a freeze of Peregrine's assets at the CFTC's request. The brokerage offered futures, cash, foreign exchange and options on futures trading. Steeply Discounted The missing money is about half of Peregrine's customer funds, according to regulators. The steeply discounted prices for claims show uncertainty about how long it will take to get paid whatever money can be recovered, said Brian Coppola, a trader of distressed debt at hedge fund Fulcrum Capital in Austin, Texas. “You have to figure out how many cents are going to come back to the estate and how long it will take,” he said. “Even if you can see 50 cents coming back, it could take five years. There are going to be lawsuits that hold up the distributions.” Fulcrum, which is looking for larger Peregrine claims, is quoting prices in the low 20s, Coppola said. Most of the claims up for sale now have a face value of less than $200,000, he said. Bank Records Peregrine reported about $400 million in customer- segregated funds around June 29, of which $225 million was on deposit at U.S. Bank, according to the National Futures Association. The regulator said it learned that Peregrine's chairman “may have falsified bank records” after finding only $5 million on deposit. Peregrine is being probed by the U.S. Federal Bureau of Investigation, said Sandy Breault, a spokeswoman for the agency's Omaha, Nebraska, office. MF Global's failure was the first time a futures brokerage's collapse led to the loss of customer money, which is supposed to be segregated in separate accounts, according to futures industry leaders. Parent company MF Global Holdings Ltd. filed the eighth-largest U.S. bankruptcy last year with debt of almost $40 billion after making $6.3 billion in bets on sovereign debt and getting margin calls. A $1.6 billion shortfall in customer funds remains. --Bloomberg News--

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.