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PFG Founder Admits: I Forged Bank Statements for 20 Years

Friday, 13 Jul 2012 | 2:52 PM ET


Russell Wasendorf Sr.
Source: PFG Best
Russell Wasendorf Sr.

CEDAR FALLS, Iowa — Russell Wasendorf, the founder and CEO of failed trader Peregrine Financial Group, has been arrested, CNBC has learned.

He has been charged with making false statements to the Commodity Futures Trading Commission relating to the value of customer segregated funds at PFG beginning back in 2010 and continuing until July 2012.

"I have committed fraud," Wasendorf said in a signed statement, according to the criminal compliant. Wasendorf also said he forged bank statements for 20 years.

Wasendorf said in his statement he turned to fraud because he had no access to needed capital.

Wasendorf is expected to appear in federal court in Cedar Rapids, Iowa at 4pm Central Time.

PFG filed for bankruptcy on Tuesday, and regulators say some $200 million in customer funds are unaccounted for.

PFGBest's Wasendorf Arrested
Russell Wasendorf, founder, chairman & CEO of PFGBest was arrested in Iowa. He is accused of making false statements to the CFTC. CNBC's Scott Cohn shares details.

One day earlier, Wasendorf — a 40-year futures industry veteran — attempted suicide in his car outside PFG's Cedar Falls, Iowa headquarters.

Authorities will not discuss Wasendorf Sr.'s condition, but a local newspaper, quoting unidentified sources, reported he is alert and responsive at an Iowa hospital, and possibly able to shed some light on the bizarre events leading up to the firm's collapse.

On June 5, employees received an invitation to Wasendorf's wedding to his fiancee Nancy Palladino, planned for Aug. 4, according to another email obtained by CNBC.

But public records in Clark County, Nevada show Wasendorf and Palladino were married in Las Vegas three weeks later, on June 30. Three days after the wedding, Wasendorf signed over power-of-attorney to his son, Russell Wasendorf, Jr.

Three days later, on July 6, the younger Wasendorf sent the email to employees saying the firm was now poised to break even.

CNBC Investigations Inc.
CNBC Investigations Inc.

PFG had been under scrutiny for months.

In February, the industry's self-regulatory organization — the National Futures Association — filed a civil complaint against the firm alleging violations involving customer funds.

PFG's in-house attorney has also not responded to CNBC's requests for comment.

— By CNBC's Scott Cohn
@ScottCohnCNBC

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