Regulators are now investigating why Iowa-based brokerage PFGBest employed Veraja-Snelling Company, a tiny accounting firm based in Illinois, to audits its books. The accounting firm appeared to be operating from a residential home in the suburbs of Chicago.
PFGBest is a futures brokerage with over $500 million in assets and several hundred employees across the U.S., Shanghai, and Canada. Experts called PFGBest’s use of such a small accounting firm a “red flag” that should have been picked up by futures regulators.
On December 31, 2010, Veraja-Snelling certified that the futures broker was in full compliance with federal commodities regulations governing segregated accounts, a form of protection for customer money.
On Tuesday, the CFTC accused the now-bankrupt firm of misappropriating approximately $200 million of customer money and then taking steps to cover it up in a scheme that dates back to February 2010, at the latest.
The allegations emerged after Russell Wasendorf Sr.’s suicide attempt on Monday morning outside the firm’s Cedar Falls offices in Iowa.
Wasendorf allegedly intercepted confidential regulatory documents sent by the NFA to the U.S. Bank, the bank used by PFGBest. Regulators say that the NFA was tricked into sending the documents, which were meant for U.S. Bank, to a P.O. box owned by Wasendorf. The NFA believed the bank was receiving the documents.
As the investigation continues, the CFTC says it will not hesitate to impose sanctions on PFGBest’s auditors if it deems it necessary.
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