The unwinding of the mess that Russ Wasendorf left behind has surely been a daunting task, but we haven’t exactly been impressed with its execution. There was the long wait for an initial distribution – and the confusion over how it was to be handled (remember when they had planned on doing two different distributions based on account size?). Then there was the ill-advised decision to auction off former PFG accounts to the highest bidder no matter what regulatory black marks they had on their record. And don’t forget the lackluster handling of a motion to have the FX and Metals case dismissed.

And now? The bill:

The trustee unwinding Peregrine Financial Group is seeking $3.7 million as payment for his eight months of work to return money to former customers of the failed broker, court documents show.

Ira Bodenstein, the court-appointed bankruptcy trustee and a lawyer in Chicago, said he is claiming roughly three percent of the $123.3 million he has returned to former Peregrine customers, as allowed under the U.S. bankruptcy code.

James Koutoulas of the Commodity Customer Coalition quickly pointed out how disconcerting it is to see “him bill the statutory max to fraud victims who stand to lose half their assets,” but we have a bigger problem with all of this. That $123.3 million of which Mr. Bodenstein is paying himself 3%? That is all money that was confirmed in segregated bank accounts on the day of the bankruptcy. Jeffries was holding $125 million of customer money when the CFTC froze PFG.

Why on Earth should Ira Bodenstein be paid almost $4 million for the recovery of the money that he did nothing to discover or recover? That money was already there, and the trustee actually delayed getting it back to customers. This cries out for amendments to the Commodity Exchange Act and bankruptcy code protecting customer assets from the bankruptcy attorney sharks.  There is no reason they should be rewarded for returning money to customers that was correctly held in segregated accounts. The CFTC should be protecting those funds from the bankruptcy proceeding in line with the laws stating they are not part of the assets of the failed firm.

We’re all for the trustee getting paid on money not already identified as customer property. Go ahead and pay him 3% of the money he gets from selling used computers, breaking leases, and converting the estate to money available to futures customers. Pay him 10% of money he can pry away from JP Morgan. Pay him 25% of money he can get in lawsuits against US Bank and others. Pay him 50% of money he finds hidden in Swiss bank accounts – we’re all for providing incentives for the trustee to get back as much money as possible.

But when they make money on customer assets that were already sitting there… well then the only incentive is to make it look like you are doing a lot of work. We’re sure it’s just a colossal coincidence that the fees charged happened to be the same as the statutory maximum… But come on. This is why bankruptcy trustees have such a poor reputation. Whether they’re charging more than $2 billion to unwind Lehman Brothers, or scooping up every available dime in small-time bankruptcy cases, watching attorneys line their pockets on the backs of other people’s suffering is never easy to stomach.