Federal prosecutors report that they have reached a plea agreement with Russell Wasendorf, Sr., the head of Peregrine Financial Group, Inc., in which he admitted to orchestrating a $200 million embezzlement scheme. Wasendorf will plead guilty to mail fraud, making false statements to authorities and embezzlement. He faces up to 50 years in prison. Wasendorf previously pleaded not guilty to 31 state and federal charges relating to the fraud and embezzlement.
Wasendorf was reportedly cooperating with investigators probing his actions in inflating the value of customer funds that were held by the shuttered brokerage. Peregrine’s receiver noted that Wasendorf has spent hours with prosecutors and regulators assisting in the identification and recovery of assets.
Peregrine filed for bankruptcy on July 10, 2012, after receiving notification that it was subject to an action by the U.S. Commodities Futures Trading Commission (CFTC) for misappropriating more than $200 million in customer funds. The filing also followed Wasendorf’s failed suicide attempt, in which he left a note addressing the fraud.
In other developments, the CFTC urged an Illinois court overseeing the bankruptcy to be cautious and not to return customer funds too quickly, asserting that the company’s records may be unreliable given the circumstances of the collapse. The CFTC stated that additional testing should first be performed to ensure that Peregrine’s books were not further manipulated by Wasendorf. (“Peregrine CEO Admits To $200M Fraud, Inks Plea Agreement,” Law360, September 11, 2012).