NFA Takes Emergency Action against PFGBest

BinaryOptionsNow | Published on July 11, 2012 at 10:33 am

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BinaryOptionsNow – The small US futures brokerage PFGBest  was shut down on Monday by the National Futures Association, the organization that regulates the online trading market in the US. It’s alleged that the broker is missing $220 million in trader funds which could be one of the most serious cases of fraud committed since the 2011 shutdown of MF Global.

The news came after PFGBest CEO Russell R. Wasendorf Sr. has been reported to have attempted to commit suicide due to alleged financial difficulties regarding the company. Shortly after, the accounts of the venture were frozen and all trading operations were immediately halted. At this moment traders are only able to liquidate positions as no trading possibilities are offered.

$220 Million in Trader Funds is Missing

The most shocking part of the event came to light just a few hours after the announcement regarding the account seizures. The NFA announced that the bank account of PFGBest that was seized only contains a sum of $5 million.

The issue is that PFGBest had previously reported that the account contains a sum of $225 million which represents the deposited funds as well as account balances of online traders. Under normal conditions brokers are never allowed to touch the funds of traders and are obliged to keep this money segregated from active funds that are used for the brokers’ operations.

It appears that this situation was created by PFGBest falsifying bank records and statements. The falsification may even go back as far as February 2010 when the company claimed that it had around $200 million in the respective bank, but investigations revealed that even at that time there was never more than $10 million in the account.

This case again puts the futures industry into a bad light not even a year after the MF Global scandal that involved similar circumstances only on a much larger scale. This whole situation is also very unexpected due to the fact that PFGBest was until just recently known as a reliable broker with longtime experience.

PFGBest Employees Say that “They’re Doomed”

Earlier today Wasendorf’s son Russ Wasendorf Jr. had briefed the company’s staff regarding this situation. It’s alleged that Russ Wasendorf Sr. has written a suicide note a day before the tragedy explaining that the company is in serious financial troubles.

A broker working for PFGBest gave a statement explaining that everyone at the company is at this moment is a serious shock and many employees even began packing their stuff arguing that all is over that the company is “doomed”.

Impact on the Futures Market

Several industry experts claim that this event could have horrible consequences on the futures market. President of Typhon Capital James Koutoulas argued that this event might create a “crisis of confidence” in the futures market especially since it happened in such a short time frame after the infamous 2011 case involving MF Global.

Koutoulas recommended online traders with accounts at PFGBest not to liquidate their accounts just yet. Instead he recommends keeping them open in case a better opportunity than liquidation might arise. If this will not happen, then closing the accounts at a later point will always remain an option.

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