Broker missing $220 million in client funds; founder attempts suicide | Reuters

Broker missing $220 million in client funds; founder attempts suicide | Reuters

Reuters) - More than $200 million in customer funds appears to be missing from the accounts of futures broker PFGBest, regulators said on Monday just hours after the firm's founder attempted suicide outside the company's Iowa headquarters.
The suicide attempt and missing money renewed anxiety over the stability of the brokerage industry less than a year after the collapse of much larger MF Global. PFGBest told customers their funds had been frozen and clients would be allowed to liquidate open trading positions, but would not be able to withdraw funds or make new trades until further notice.
The National Futures Association (NFA), an industry group that also plays a regulatory role, said it had issued an emergency order to effectively freeze PFGBest's operations after finding that a U.S. bank account the broker said contained $225 million in customer funds actually held only $5 million.
"It appears that PFG does not have sufficient assets to meet its obligations to its customers," the NFA said.
The disclosure came hours after owner Russell Wasendorf Sr., a 40-year veteran of futures markets, was found in his car near the company's new headquarters, having apparently attempted suicide. He is in critical condition at the University of Iowa Hospitals, according to local news reports.
PFGBest, which has brokered trades in U.S. commodity and forex futures and options for 20 years, told clients it was in liquidation-only status as "some accounting irregularities are being investigated regarding company accounts."
"What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds," the note said.
PFGBest officials were not immediately available to comment. Local law enforcement officials said the investigation would soon likely pass to the U.S. Attorney's Office.
With about $400 million in segregated customer accounts, less than a tenth the amount MF Global had when it filed for bankruptcy, the fallout will be less severe. But the news still sent shockwaves through the futures industry and added new agony for some traders still missing money from MF Global.
"For the futures market, it's horrible," said James Koutoulas, a commodities trader and president of hedge fund Typhon Capital, who has led a campaign among former MF Global customers to recoup their funds. "It's a crisis of confidence."
Koutoulas said he had nine accounts at PFGBest. His initial instructions to traders were not to liquidate the accounts. Instead, he will keep them open as long as he wants to be in the trades. He will liquidate if he does not like the positions before they are bulk transferred somewhere.
"WE'RE DOOMED"
One broker at PFGBest said that Wasendorf's son, Russ Wasendorf Jr., briefed employees about the events earlier in the day, saying that a suicide note had been found alluding to some kind of financial troubles with the company. The younger Wasendorf "sounded like he was in another world."
"Everybody here is obviously in shock," said the broker, adding that some employees had begun packing up shortly after the announcements. "Pretty much everybody around here said we're doomed."
One former employee of the firm said he had grown concerned that Wasendorf did not do more to distance the company from a massive $194 million forex-trading Ponzi scheme run by Trevor Cook in Minnesota, who admitted defrauding more than 700 investors. Cook is serving 25 years in prison.