Feds file suit against U.S. Bank

U.S. regulators on Wednesday filed suit against U.S. Bank for allegedly facilitating the embezzlement of customer funds by the jailed founder of Peregrine Financial Group Inc., the collapsed futures brokerage.

 
The civil charges filed Wednesday by the Commodity Futures Trading Commission (CFTC) against Minneapolis-based U.S. Bancorp’s U.S. Bank unit revolve around the bank’s oversight of accounts used by Peregrine founder and chief executive Russell Wasendorf Sr. to siphon client funds from the firm over a period of almost 20 years, according to a report by The Wall Street Journal.

The CFTC alleged that U.S. Bank “knowingly allowed and facilitated” Wasendorf’s transfers of millions of dollars of customer funds out of the account to pay for his private jet, his restaurant and divorce settlement, according to the complaint filed in U.S. District Court for the Northern District of Iowa.

Customer funds also were used as collateral on loans to fund Peregrine’s $20 million headquarters building in Cedar Falls, Iowa, according to the complaint.

U.S. Bank said in a statement that the charges were “without merit” and that it was a “victim of the same fraud — one that the CFTC failed to detect.”

Wasendorf in February began serving a 50-year federal prison sentence after pleading guilty to charges that he stole $215 million from clients.

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