Judge Doyle is set to rule today on a settlement which was requested by an Illinois federal judge in respect to the trustee overseeing ill-fated FX company Peregrine Financial Group (PFG)’s bankruptcy, whereby the judge was asked to approve a $10 million settlement reached with the receiver recovering funds from a Ponzi scheme run by jailed Crown Forex SA principal Trevor Cook.
Chapter 7 trustee Ira Bodenstein asked Judge Carol A. Doyle to approve the settlement in a report by Law360 two weeks ago, which would release the Peregrine estate from all but one of attorney R.J. Zayed’s claims, including allegations that Peregrine managers ignored red flags as Mr. Cook and his cohorts sent them $48 million in illegal profits from his scheme.
The settlement addresses a set of consolidated claims alleging that Mr. Cook maintained accounts with Peregrine that were funded with money he stole in his Ponzi scheme, Mr. Bodenstein said.
“The parties have engaged in significant and substantive negotiations that culminated in the proposed settlement and stipulation,” the motion says.
“As a result of his examination of the claims and the complaint and the potential costs of litigating and liquidating them, the trustee has concluded in the exercise of his business judgment that the proposed settlement is in the interests of the estate.”
Trevor Cook was sentenced in August 2010 to 25 years in prison for bilking thousands of investors out of at least $190 million in his fraudulent FX scheme.
Zayed’s suit, filed in Minnesota federal court months before Peregrine entered bankruptcy, alleged that two Peregrine managers, Nolan Schiff and Ryan Peterson, ignored obvious signs that Mr. Cook’s funds were not segregated and therefore exposed to risk as Mr. Cook “scrambled to use funds from one account to cover a margin deficiency in another” over the course of their dealings.
Mr. Cook’s desperate emails sent to Peregrine as he tried to cover various margin calls “were objective evidence of fraud,” yet Peregrine “focused on one thing only: limiting its own financial exposure,” the complaint said.
Peregrine’s public woes began July 9, 2012, when the National Futures Association took action against the firm, and its CEO Russell Wasendorf Sr. was found unconscious in a car outside the firm’s offices in Cedar Falls, Iowa, in an apparent suicide attempt, prior to his sentencing to 50 years in jail.
The following day, Peregrine Financial Group went into administration, with the US authorities having filed a fraud suit against the firm, later followed by charges leveled at Mr. Wasendorf making him personally responsible, after which he pled guilty to illegitimate gains from client funds of $100 million, and making exaggerated statements of the value of client funds to the value of $210 million.
Mr. Bodenstein is represented by Robert M. Fishman, David R. Doyle and Mark L. Radtke of Shaw Fishman Glantz & Towbin LLC.