Electronic confirmation service Confirmation.com pointed out Monday that its system helped uncover a more than $200 million fraud perpetrated by Peregrine Financial Group’s PFGBest unit.
Peregrine CEO Russell Wasendorf Sr. was charged earlier this month with lying to federal regulators (see Peregrine Chief Wasendorf Charged with Lying to Regulators). In a note left behind in a failed suicide attempt, Wasendorf admitted to using false bank statements to embezzle millions of dollars from customer accounts.
Wasendorf had resisted using an electronic confirmation service to verify his firm’s statements, but was ultimately forced to allow access under pressure from the firm’s regulator, the National Futures Association, which wanted to use the online system to verify accounts at his and other firms. The day after he allowed the electronic confirmation system to be used at his firm, he was discovered unconscious in his car.
“PFGBest is a sadly common example of how easily bank and account information can be falsified to evade detection of accounting frauds,” said Brian Fox, founder and chief marketing officer of Confirmation.com, in a statement. “CEO Russell Wasendorf resisted using our service for months, presumably because he knew that as soon as electronic confirmation went into effect, he would be exposed. We have seen this pattern several times since launching the service in 2000—resistance to our system is a red flag indicating fraud.”
In this case, thousands of commodity futures investors had their accounts frozen while regulators attempt to identify the actual location of the funds. Press reports indicate that the NFA is moving to mandate use of the system by all of their regulated brokerages.
“This is a textbook case of how easy it is to use false mailing addresses and fax machines to conceal massive theft and fraud,” Fox added.
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