The founder of failed commodity futures trading firm, Peregrine Financial Group Inc., has been sentenced to 50 years in federal prison for embezzling millions from client accounts and lying to regulators in order to carry out his scheme over 20 years.
The U.S. attorney’s office in the northern district of Iowa announced that Russell Wasendorf, Sr., 64, from Cedar Falls, Iowa, was sentenced to 50 years in prison by US district court chief judge, Linda Reade. The term is the maximum sentence allowed by law. He was also sentenced to a three-year term of supervised release after the prison term, ordered to forfeit $100 million and to make $215.5 million in restitution to more than 13,000 victims.
Wasendorf received the prison term after a September 17, 2012 guilty plea to one count each of: mail fraud, embezzlement of customer funds by a person registered under the Commodity Exchange Act, and making false statements to the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA).
In a plea agreement, Wasendorf admitted that, from the early 1990s through July 2012, he stole millions of dollars from Peregrine’s customers, at least in part, by withdrawing money secretly from a customer segregated bank account and then by omitting the withdrawals from and inflating the balances on forged bank statements. He also admitted that he prevented regulators from discovering his crimes by submitting false reports and forged bank account verification forms to the CFTC and the NFA. He also used a post office box to intercept paperwork sent by regulators and intended for the bank.
“By lying to investors and regulators, Wasendorf defrauded thousands of innocent investors out of a staggering $215,000,000,” said acting U.S. attorney, Sean Berry. “The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors.”
As part of the plea agreement, Wasendorf also agreed that any proceeds from any publicity about his crimes would be applied toward his restitution. A bankruptcy trustee and a court-appointed receiver have been gathering known assets for distribution to creditors, including Peregrine’s commodities futures account holders.