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

ambulance

2 killed in head-on crash involving car, dump truck

The crash happened just before 2 p.m. Friday, according to the State Patrol.

coronavirus

Here is Minnesota's COVID-19 update for Saturday, October 31

Minnesota has surpassed 3,000 new cases on consecutive days.

high school football

Minnesota Football Showcase postponed due to COVID-19

The MFCA All-Star Game will be played in June 2021.

Screen Shot 2020-10-31 at 7.26.05 AM

Here's what President Trump said on his visit to Minnesota

The president targeted Gov. Tim Walz and Keith Ellison at his Minnesota rally.

Screen Shot 2020-10-30 at 6.09.58 PM

Here's what Joe Biden said in Minnesota Friday

Presenting himself as the candidate for a united country, he pledged improvements on affordable healthcare, pandemic relief

Mohamed Ibrahim

Missed PAT seals Gophers' fate against Maryland

Mohamed Ibrahim tied a school record with four touchdowns, but the Gophers lost in overtime.

dnr trout stocking helicopter

DNR uses a helicopter to more efficiently stock lakes with trout

In the past, the DNR used airplanes to stock remote lakes with fish, but the survival rate of the fish was only 85%.

steve simon zoom call

Secretary of State explains plans for segregated absentee ballots

Election officials are reminding voters that it's too late to mail in your absentee ballots.

Halloween, trick-or-treating

Osterholm on safe trick-or-treating: 'I would say go ahead with it'

The infectious disease expert's opinion doesn't align with the CDC's guidance.

Related