THE futures sector of the United States wobbled Tusday as beleaguered PFG Best, a broker firm based in Iowa, collapsed following accusations by federal regulators that it misused client money for over 2 years, putting trader trust in bad light anew barely months after the disintegration of MF Global.
The CFTC, who along with regulators had attested the lack of any legal encumbrances to several brokers after a series of onsite inspections five months ago, claimed that PFG Best’s controlled Peregrine Financial Group division and its proprietor had lied to the regulators and circumvented its clients so it could conceal its arrears that has now ballooned to over $200 million.
The CFTC, in a statement of disagreement versus PFG chairman and founder Russell Wassendorf Sr., whose Monday’s suicide attempt outside the company’s Cedar Falls headquarters, further pointed out that the whereabouts of the money is yet to be determined.
Peregrine Financial on Tuesday filed for liquidation under Chapter Seven of the United States Bankruptcy Code, involving around $500 million to $1 billion worth of assets, and between $100-M and $500-M of liabilities, and around 10 thousand and 25 thousand creditors.
Wasendorf counterfeited bank accounts and falsified signatures on documents and sent them through mail back to the NFA, which is based in Illinois, a source, who requested anonymity, said. The contrivance apparently started to be divulged as the NFA employed electronic confirmations.
Maintaining its triple-A grade
In other developments, ratings agency Fitch has kept the United States at its top triple-A credit grade but has likewise left the economy’s forecast at negative, noting the Obama administration and Congress’ failure to strike up a deal that would slash financial deficit.
According to Fitch Ratings, doubts over government taxes and budget rulings linked to fiscal cliff depends on near-term forecasts and heightens the possibility of another massive financial crisis.
A huge budget battle could start after the November polls and extend well into 2013, despite the fiscal uncertainty’s threat that translates to around half a trillion dollars in imminent tax hikes and spending reductions.
Fitch has also pointed out that the weight of federal debt on the country’s economy will keep on increasing and may hinder overall growth if a deal is not finalized with regards the deficit.
Major credit rating firms have set the warning alarm for several weeks on end regarding a looming downgrade if cuts on budget deficit are not ironed out. The pain still persists from S&P’s efforts more than 11 months ago, slashing its rating of long-term United States Treasury securities by one notch to double-A, from triple-A — the first downgrade of the country’s federal debt ever since.