CEO of failed Iowa brokerage arrested, charged

IOWA CITY, Iowa -- The head of a now-defunct Iowa commodity futures company was arrested Friday and is facing allegations of misappropriating millions of dollars of customer money, federal officials say

Russell Wasendorf Sr., 64, of Peregrine Financial Group will appear later Friday in federal district court in Cedar Rapids, Iowa, and is charged with making false statements to a federal regulatory agency.

From 2010 through July 2012, Wasendorf is accused of making false statements to the U.S. Commodity Futures Trading Commission about the value of customer segregated funds that his company held, according to the complaint.

"As with any criminal case, a charge is merely an accusation and a defendant is presumed innocent until and unless proven guilty," the U.S. Attorney's Office for the Northern District of Iowa said Friday.

Peregrine, also known as PFGBest, filed for bankruptcy Tuesday, the same day regulators alleged that Wasendorf and the company misappropriated $200 million in customer money. Two regulatory agencies and the FBI in Omaha, Neb., are investigating.

On Monday morning, sheriff's deputies say Wasendorf tried to asphyxiate himself by running a hose from his vehicle's tailpipe into its passenger compartment as his vehicle was parked behind the company's $18 million headquarters north of Cedar Falls, Iowa, a town of almost 40,000 about 90 miles northeast of Des Moines, Iowa. Deputies found a suicide note detailing some of Wasendorf's alleged financial improprieties, the sheriff said.

Wasendorf, who moved the headquarters of his fast-growing brokerage business to Cedar Falls from Chicago in 1990, has been recovering at University of Iowa Hospitals, according to several media reports.

In the past four days, U.S. Commodity Futures Trading Commission and National Futures Association ordered the company shut down, and Peregrine filed for bankruptcy.

Peregrine said Tuesday that it had $500 million to $1 billion in assets, and $100 million to $500 million in liabilities. The company seeks a Chapter 7 liquidation, rather than a Chapter 13 bankruptcy, to reorganize.

It owns more than a dozen commercial properties in Cedar Falls and employed 125 people.

Wasendorf started as a commodities trader in the basement of his Cedar Falls home in 1972, offering seminars and educational programs to other traders, according to Reuters news service. In 1990, he launched Peregrine Financial Group, which would become PFGBest, and was an early promoter of electronic trading systems.

The business grew in the late 1980s after making a windfall profit by advising customers to short sell the financial futures market 10 days before the "Black Monday" stock market crash of 1987, according to Peregrine's website.

The company, which catered to local traders, farmers, wealthy individuals and small-market players, helped its 1,845 clients make margin, futures and other trades, according to court documents.

The firm in recent years opened offices in Canada and Shanghai before moving its headquarters from Chicago to Cedar Falls.

Contributing: Victor Epstein, The Des Moines Register