More than $200 Million Missing from Commodities Firm's Customers' Accounts

Reuters has reported that PFGBest, a commodity futures brokerage firm, told clients on Monday, July 9, 2012 that their accounts had been frozen. The commodities firm made this announcement just hours before the National Futures Association ("NFA") said $220 million in customer funds were missing from the PFGBest's purportedly client-segregated bank accounts. PFGBest's chairman also allegedly had attempted suicide. This appears to be yet another example of massive abuse of the trust that investors place in financial firms.

The situation with PFGBest certainly seems familiar. In November 2011, it was reported that MF Global, another commodity futures brokerage firm, was missing hundreds of millions of dollars of clients' money that purportedly had been held in segregated accounts. And there have been accusations that MF Global used their clients' moneys to meet margin calls. While PFGBest is significantly smaller than MF Global, the fallout may be greater. If the NFA's report on the missing funds is accurate, questions about the safety of the brokerage model and regulators' competence are inevitable.

At this point, it is unclear what has happened to PFGBest's clients' missing fund. As a result of the missing funds, PFGBest clients are not permitted to withdrawals or make any new trades.

PFGBest's shortfall may, in fact, extend back several years. The NFA said that customer account balances reported by PFGBest as early as February 2010 may have been inflated by $190 million, with PFGBest only having $10 million of a claimed $200 million. In the letter, it said PFGBest's clearing unit, Peregrine Financial Group, reported to the NFA just two weeks ago that it held $400 million in client-segregated funds, with over $225 million on deposit at the firm's bank. But after receiving information that PFG's founder and owner may have falsified records, the NFA stated that only $5 million was on account at the bank.

Amazingly, just this past January, the CFTC and NFA conducted a joint review of the 70 largest Futures Commission Merchants and found no material breaches of requirements that serve to protect customer funds. In light of the latest debacle involving hundreds of millions of dollars of seemingly "vaporized" client funds, some may question the thoroughness of the review.

If your PFGBest account has been frozen, or you have been told that your PFGBest money is missing, please feel free to contact a lawyer at Dimond Kaplan & Rothstein, P.A for a FREE case evaluation to determine if we can help you recover any funds that have been lost.

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