In case you missed it, PFGBest filed for Chapter 7 bankruptcy. Bloomberg reports:
Peregrine listed assets of more than $500 million and debt of more than $100 million in a Chapter 7 petition filed today in U.S. Bankruptcy Court in Chicago. Separately, U.S. District Judge Rebecca Pallmeyer issued an order freezing Peregrine’s assets at the CFTC’s request, saying it appeared there was “good cause” to believe the firm and its founder, Russell Wasendorf Sr., violated the federal Commodity Exchange Act.
We also now know that a receiver has been appointed:
Pallmeyer’s order today prohibited the destruction of the firm’s books and records and granted the CFTC’s request for access to inspect them. She also appointed a receiver, Michael M. Eidelman of Chicago’s Vedder Price PC, placing him in charge of the business.
“Until further order of the court,” she said, “the receiver’s compensation is limited to $25,000 to be satisfied first out of available assets of defendant Russell R. Wasendorf Sr. and then from available assets of defendant Peregrine Financial Group Inc.”
Alright, so what does this all mean? There are a couple of things to note. First off, the declaration of Chapter 7 bankruptcy, which is frequently referred to as liquidation bankruptcy, and the appointment of a receiver, are good news, as it’s a step toward locking up assets and moving the process along. There’s a wide range of potential liabitilities and assets, so we’re not sure what the final outcome will be. In a perfect world, it’s minimal liabilities and maximum assets, but we won’t know whether that’s the case until the proceedings are further along.
That being said, it appears as though the bankruptcy may proceed under commodity laws, and that is definitely good to hear. The freezing of assets and appointment of the receiver were done by the district court at the behest of the CFTC as a result of potential violations of the Commodity Exchange Act. We’re no lawyers, but from what we’ve gathered, the filing by the entity explicitly categorized as an FCM (unlike MFGH) keeps the bankruptcy proceedings under commodity laws, putting commodity clients first in line under 17 C.F.R §190.
The coming days and weeks will bring more clarity on how the situation will be resolved. Our top priority remains the protection of our clients. Making them whole, obviously, is the first step, but we also don’t EVER want to see this happen again. It’s time for real changes to start getting implemented.