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

Mesirow acquires part of flexPATH in second retirement deal of 2026
Mesirow acquires part of flexPATH in second retirement deal of 2026

Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.

Advisor moves: LPL lands $350M veteran advisor duo in Florida
Advisor moves: LPL lands $350M veteran advisor duo in Florida

Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.

SEC accuses crypto firm founder of running $425 million Ponzi scheme
SEC accuses crypto firm founder of running $425 million Ponzi scheme

It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.

MassMutual Ascend tops $2 billion in RIA annuity sales as advisors warm to income products
MassMutual Ascend tops $2 billion in RIA annuity sales as advisors warm to income products

Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.

Fintech bytes: Wealth tech firms target advisor productivity with new integrations
Fintech bytes: Wealth tech firms target advisor productivity with new integrations

Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income