Skip to main content

Federal regulators blame U.S. Bank in fraud suit

  • Author:
  • Updated:
    Original:

The U.S. Commodity Futures Trading Commission accuses U.S. Bank of mishandling the funds of a brokerage firm that collapsed, the Star Tribune reports.

The former chief executive officer of Peregrine Financial Group Inc. was convicted of defrauding customers out of more than $200 million. Russell Wasendorf Sr. is now serving a 50-year prison sentence.

The civil lawsuit filed Wednesday claims U.S. Bank, the lead bank of Minneapolis-based U.S. Bancorp, failed to protect the remaining assets of the Iowa-based brokerage, Minnesota Public Radio notes.

The complaint alleges that "U.S. Bank improperly held Peregrine’s customers’ funds in an account U.S. Bank treated as Peregrine’s commercial checking account and knowingly facilitated Wasendorf’s transfers of millions of dollars of customers’ funds out of this account to pay for Wasendorf’s private jet, his restaurant, and his divorce settlement, among other things. U.S. Bank knew that these transfers were not for the benefit of Peregrine’s customers," according to a news release.

The Business Journal says U.S. Bank released the following statement on the charges:

"Like the CFTC, we are sympathetic to the victims of Mr. Wasendorf’s self-admitted fraud. U.S. Bank was also a victim of the same fraud – one that the CFTC failed to detect. This lawsuit is without merit and represents an inappropriate attempt to reassign blame to U.S. Bank.

"The regulatory program in place at the time allowed Wasendorf to intercept regulator communications that were intended for the bank and to falsify bank responses to those communications, all without the bank’s knowledge – as Mr. Wasendorf has already admitted.

"Wasendorf’s scheme to keep the bank in the dark included creating a P.O. Box to intercept communications from the regulator to the bank. As he has admitted, Wasendorf actively deceived the bank. At no time did we have any knowledge that Wasendorf was running a fraudulent scheme.

"The bank did nothing wrong and the bank will defend itself vigorously. Banks are not responsible for losses generated by customers who are fraudsters.

"The lawsuit itself accuses the bank of violating technical regulations that have never been interpreted by any court to apply when a bank is not notified that it was holding customer segregated funds. The CFTC’s theory against the bank is unprecedented, seeking to impose responsibilities that the bank never had and alleging violations that it never committed."

Click here, to follow U.S. Banks stock performance.

Next Up

storm, severe weather, derecho

Hail and tornadoes possible Thursday in Minnesota, Iowa, Wisconsin

Storms are expected to fire along a warm front draped across southern Minnesota.

Screen Shot 2021-04-23 at 8.02.52 AM

Bde Maka Ska pavilion construction begins next week

The former lakeside food stand, home to Lola on the Lake, caught fire in 2019.

Pixabay - laptop computer dark screen

Undercover child sex sting sees 4 men arrested in St. Louis Park

One of the men is being held as he's in a position of authority of power over children.

Owl

New Raptor Center data shows 'substantial drop' in bird flu patients

However, the virus remains a serious health threat for birds.

Screen Shot 2022-05-18 at 6.16.34 PM

Suspect kills himself after shooting woman and baby at Fargo restaurant

The suspect was found dead in a stolen vehicle in Minnesota.

CK Kyle Kasio

Charges: Guest stabbed three men as they slept in Albert Lea

Investigators believe the suspect is related to all three victims.

Kandiyohi County Courthouse

2 charged for fentanyl overdose death of 19-year-old

The-19-year-old died from a fentanyl overdose last month.

storm, severe weather

Severe thunderstorm watch: Hail, 65 mph gusts, tornadoes possible

The watch is just north of the Twin Cities metro area.

Lake Minnetonka

The staggering rise of Minnesota's most famous lakes this spring

Imagine dumping Lake Minnetonka into Lake Superior 47 times.

Marijuana, cannabis

Minnesota Senate shoots down latest marijuana legalization attempt

The bill didn't receive the required votes for further consideration on Wednesday.

tree

Minneapolis wants to use $1M in federal cash to plant 200,000 trees

The goal is to have these trees planted by the year 2040.

Related