Peregrine Financial bankruptcy spotlights weak regulation
A climber works his way up the side of an ice-covered grain silo in Cedar Falls, Iowa. Peregrine Financial, based in Cedar Falls, filed for Chapter 7 bankruptcy last night.
Jeremy Hobson: We'll start with a brokerage firm in Cedar Falls, Iowa, called Peregrine Financial. The company is liquidating amid allegations that it defrauded customers and lied to federal regulators, and there's a whole lot more.
Marketplace New York Bureau Chief, Heidi Moore, is here live with the details. Good morning.
Heidi Moore: Good morning.
Hobson: Well, Heidi what do we know at the point about what happened to Peregrine Financial?
Moore: Sure, to understand it, you have to understand this is a farm belt story. Peregrine is one of the brokerages where America's farmers invest their money to protect themselves against changes in crop prices, like corn and wheat and so on. So it's a brokerage firm that let those farmers hedge their prices, but instead of investing their money, Peregrine allegedly stole it. So there were red flags before. There were allegations of a ponzi scheme, but most recently this all came to a head on Monday, when the founder of Peregrine, Russell Wasendorf, tried to kill himself in the parking lot of company. The company fired all of its employees with a few hours notice and told regulators it had $225 million in the bank. It only had $5 million, now it's in bankruptcy.
Hobson: So a very unbelievable story, but for those us who are not invested in Peregrine ourselves, what is the takeaway here?
Moore: Right, besides the unbelievable human story, a few months ago you might remember there was MF Global -- it was another brokerage in the same kind of business and it had a huge scandal. It was run by Jon Corzine, and it also took customer money allegedly. And so this tells us that this whole futures industry, which affects America's farmers, needs more oversight. Only now is the FBI getting into this, but where are our regulators, we need more from them.
Hobson: Marketplace New York bureau chief, Heidi Moore, thanks a lot.
Moore: Thank you.