Is this a matter of sensationalism by all the media outlets? Or is the financial industry really this crooked? Sounding eerily similar to the MF Global scandal, now we have another example of a firm taking its clients’ funds to use for their own gain, or in this case, loss. Peregrine Financial Group Inc. apparently has a $200 million shortfall in its client accounts, according to CFTC regulators, who are now only involved after the National Futures Association brought to light the irregularities at PFG and the attempted suicide of its CEO and founder, Russell Wasendorf Sr. The FBI is also probing into the firm’s activities.
As Lauren Lyster’s Capital Account segment at RT reports, these fraudulent activities affect legitimate businesses, such as Treasure Island Coins Inc. Bullion dealers typically buy physical bullion which they resell to customers. In order to protect themselves from severe price fluctuations in the gold and silver markets, these companies hedge their physical bullion with contracts in the futures markets. As things went sour at PFG, its clients saw their spot-metals futures positions fall into the control of PFG’s primary credit facility – guess who… JP Morgan. Those positions are presumably being liquidated causing further losses to PFG clients, but possibly benefiting JP Morgan, enabling them to profit from the lion’s share of suspected commercial short positions.