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UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT FOR ILLINOISEASTERN DIVISIONU. S. COMMODITY FUTURESTRADING COMMISSION,Plaintiff,v.PEREGRINE FINANCIAL GROUP, INC.,andRUSSELL R. WASENDORF, SR.,Defendants.Civil Action No: _________Hon.___________________Complaint for Injunctive and OtherEquitable Relief and Civil MonetaryPenalties Under the CommodityExchange ActCOMPLAINT
The United States Commodity Futures Trading Commission (“Commission” or “CFTC”),
by and through its attorneys, is informed and believes, and based thereon alleges as follows:
INTRODUCTION
1.
Defendant Peregrine Financial Group, Inc. (
“
PFG
”
) is a registered futures
commission merchant (“FCM”). FCMs receive money, securities and other property (“customer funds”) from their customers to margin, guarantee, or secure the customers’ futures and options
trades. Under the Commodity Exchange Act (
the “Act”), 7 U.S.C. §§ 1
et seq
. (2006), the Act,as amended,
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to be codified at 7 U.S.C. §§ 1
et seq
., and the Commission’s Regulations (the
1
The Commodity Exchange Act, as amended by the Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, Title XIII (the CFTC Reauthorization A
ct of 2008 (“CRA”)),
§§ 13101-13204, 122 Stat. 1651 (enacted June 18, 2008) and the Dodd-Frank Wall StreetReform and Consumer Protection Act of 2010, Pub. L. No. 111-
203 (“Dodd
-
Frank Act”), Title
VII (the Wall Street Transparency and Accountability Act of 2010), §§701-774, 124 Stat. 1376(enacted July 16, 2010).
Case: 1:12-cv-05383 Document #: 1 Filed: 07/10/12 Page 1 of 14 PageID #:1
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“Regulations”) promulgated thereunder, 17 C.F.R. §§ 1.1
et seq.
(2011), FCMs are required tosegregate and separately account for all customer funds.2.
From at least February 2010 through the present (“relevant time”), PFG andRussell R. Wasendorf, Sr., PFG’s chief
executive
officer (“CEO”) and sole owner, have failed to
maintain adequate customer funds in segregated accounts. That shortfall exceeds and hasexceeded $200 million. PFG and Wasendorf have used customer funds for purposes other thanthose intended by its customers, and consequently, have misappropriated these funds. Thewhereabouts of the funds is currently unknown.3.
Additionally, during at least this same period, PFG and Wasendorf have filedfalse reports with the CFTC regarding the amount of customer segregated funds held by PFG.4.
By this conduct and further conduct described herein, PFG and Wasendorf haveengaged, are engaging, or are about to engage in acts and practices that violate certain provisionsof the Act, as amended, to be codified at 7 U.S.C. §§ 1
et seq.,
and the Commission’s
Regulations, 17 C.F.R. §§ 1.1
et seq.
(2012).5.
Accordingly, the CFTC brings this action pursuant to Section 6c of the Act, asamended, 7 U.S.C. § 13a-1, to enjoin PFG and Wasendorf
’s unlawful acts and practices and to
compel their compliance with the Act and the Regulations. Moreover, unless immediatelyrestrained and enjoined by this Court, additional PFG customer funds may be misappropriated ordissipated, and Defendants PFG and Wasendorf are likely to continue to engage in the acts andpractices alleged in this Complaint and similar acts and practices, as more fully described below.Consequently, the Commission seeks a restraining order pursuant to 6c(a) of the Act, asamended, 7 U.S.C. § 13a-1(a), prohibiting Defendants from destroying, altering or disposing of,or refusing to permit authorized representatives of the Commission to inspect, when and as
Case: 1:12-cv-05383 Document #: 1 Filed: 07/10/12 Page 2 of 14 PageID #:2
3requested, any books and records or other documents, and prohibiting any person fromwithdrawing, transferring, removing, dissipating, or disposing of any funds, assets, or otherproperty. In addition, the Commission seeks remedial ancillary relief, including withoutlimitation restitution, disgorgement, pre- and post-judgment interests, and such other equitablerelief as this Court may deem necessary and appropriate, and civil monetary penalties.
JURISDICTION AND VENUE
6.
This Court has jurisdiction over this action pursuant toSection 6c(a)of the Act,7 U.S.C. § 13a-1(a) (2006),which authorizes the Commission to seek injunctive relief againstany person whenever it shall appear that such person has engaged, is engaging, or is about toengage in any act or practice constituting a violation of any provision of the Act or any rule,regulation, or order thereunder.7.
Venue properly lies with this Court pursuant to Section 6c(e) of the Act,7 U.S.C. § 13a-1(e) (2006), in that Defendants are found in, inhabit and/or transact or havetransacted business in this District, and Defendants
’
acts and practices in violation of this Actoccurred, are occurring, and/or are about to occur within this District, among other places.
PARTIES
8.
The
U.S. Commodity Futures Trading Commission
is an independent federalregulatory agency charged by Congress with the responsibility for administering and enforcingthe provisions of the Act, 7 U.S.C. §§ 1 et seq. (2006), the Act, as amended, to be codified at7 U.S.C. §§ 1 et seq., and the Regulations promulgated thereunder, 17 C.F.R. §§ 1.1 et seq.(2012).9.
Peregrine Financial Group Inc
. is and was at all relevant times a registeredFCM located at 311 South Monroe St., Suite 1300, Chicago, Illinois.
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