Jesse’s Café Américain: US Futures Brokerage Accounts Frozen – Hundreds of Millions In Customer Mo ney Missing

Jesse’s Café Américain

“Mr. David Stockman has said that supply-side economics was merely a cover for the trickle-down approach to economic policy—what an older and less elegant generation called the horse-and-sparrow theory: If you feed the horse enough oats, some will pass through to the road for the sparrows.” John Kenneth Galbraith

09 July 2012

US Futures Brokerage Accounts Frozen – Hundreds of Millions In Customer Money Missing

Mr. Tucker of the Bank of England has indicated his recent disillusionment with rational expectations and the efficient markets hypothesis. ‘The markets are a cesspit and not to be trusted,’ said the pot to the kettles.

Abuse of the Libor system may be only one part of the banks’ dishonesty over crucial financial information, suggesting that other markets should now be investigated. “I can’t be confident of anything after learning of this cesspit.”

In keeping with this unraveling of the serial fraud known as the Anglo-American banking system, The National Futures Association today shut down operations at PFGBest after hundreds of millions of dollars of customer money were found to be missing from bank accounts reportedly held on behalf of customer accounts by the futures and options brokerage.

Apparently the CFTC had missed this one when they took strict measures to prevent another MF Global from occurring in the futures markets.

Get your money as far away from the financial markets as is possible while you can. There will not be time to move if the counter party dominoes start falling, and even more customer money begins to vaporize.

From John Lothian Newsletter:
Update 3 (5:54 PM CST):

In a Member Responsibility Action, released Monday afternoon, NFA alleges that PFGBest’s reported customer funds deposited at U.S. Bank did not match the amounts NFA found when NFA contacted the bank Monday. On June 29, 2012, PFGBest reported to the NFA that they had nearly $400 million in customer funds, of which approximately $225 million was purportedly deposited at U.S. Bank. The actual funds found in the account were approximately $5 million.

Furthermore, the NFA alleges that in contrast to purported bank confirmations submitted to the NFA that sought to confirm U.S. Bank balances as of February 2010 and March 2011, reported balances of approximately $207 million and $218 million, respectively, were actually less than $10 million for each of these months.

NFA says in the MRA that PFGBest was unable to demonstrate to the NFA that it had sufficient capital to meet its minimum adjusted net capital requirements or segregated funds to meet its obligations to customers.

US broker PFGBest freezes funds after founder’s suicide attempt
By Tom Polansek and David Sheppard
9 July 2012

CHICAGO/NEW YORK, July 9 (Reuters) – Independent U.S. futures broker PFGBest said it had effectively frozen customer accounts on Monday after a suicide attempt by the company’s founder set off an investigation into possible “accounting irregularities.”

In a dramatic turn that may trigger a new round of anxiety over the stability of the brokerage industry less than a year after the collapse of much larger MF Global, the Cedar Falls, Iowa-based firm told customers that they would be limited to liquidating open positions until further notice.

The disclosure came hours after owner Russell R. Wasendorf Sr, a 40-year veteran of commodity markets, was found in his car near the company’s new headquarters, having apparently attempted to commit suicide. He is in critical condition at the University of Iowa Hospitals, according to local news reports.

PFGBest, which brokered trades in U.S. commodity and foreign exchange futures and options, told clients that the National Futures Association (NFA) and other officials had put its funds on hold, and that it was in “liquidation-only” status with its futures commission merchant (FCM), which clears its trades.

“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. Messages and emails to NFA were not returned.

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 likely be less severe. But news of more financial troubles in the brokerage sector still threatens to further erode confidence…

Read the rest here.

Jesse at 8:15 PM

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