Original subtitles

In this episode of American Greed.

If you're not trading with the best resources, it's time to get smarter.

He's a trailblazer with a fanatic ambition.

And by all appearances, Russell Wozendorf leads one of the most

trading firms of its kind.

Everything that I heard was fabulous. It was just something that everybody

wanted to be a part of.

But if there's one thing Wozendorf knows how to sell, it's a brilliant lie.

While more than $200 million goes missing.

He pulled off an audacious fraud for 20 years.

I concealed my crime so easily, but what wasn't simple was living with the

guilt. He's a thief. It's just who he is.

July 9th, 2012.

It's just before 8 a .m. in Cedar Falls, Iowa.

At Peregrine Financial Group, a leading independent commodities brokerage firm,

an employee makes a startling discovery.

She immediately calls for help.

9 -1 -1, what's the problem?

There's a car behind our building with a tube from the exhaust into...

The window and there's a person inside.

Okay. And the car's running.

Can you tell if they are?

No, I haven't been down. I'm on the top floor.

Moments later, her coworkers go out to investigate.

I just opened the door, but I don't know if... Okay, are you watching it from

the... Yes, I'm watching it right now.

I've got a group of people out there.

Oh, my God.

Can you tell me what's going on?

She recognizes the vehicle's occupant.

It's the chairman and CEO of Peregrine, Russell Wassendorf.

Is he with your business? He owns our business.

He's the owner of the business?

Okay. Okay. Oh, my God.

Wassendorf was alive. He was breathing, but he was incoherent.

Police say that he had been downing vodka and bleeding pills.

He was airlifted to the hospital a short time later.

Police find a signed letter inside Wozendorf's car.

It reveals an extraordinary secret that will forever change the lives of more

than 200 employees and 13 ,000 clients.

This is my last confession, the letter begins.

I have committed fraud.

It just told the story of this caper that he'd been pulling off over the last

two decades.

Since that fateful day, Russell Wozendorf has never spoken to the media,

now.

In an interview with American Greed, he tells his story from a federal prison in

Terre Haute, Indiana.

It begins in rural Iowa, where he was born in 1948, the youngest of three

children. My father died when I was five years old.

After a period of mourning, my mother got a factory job. We were quite poor.

lived in a very, very small farmhouse.

No hot and cold running water, no indoor toilet facilities.

But then, very soon, my mother earned enough money to be able to buy a very

inexpensive house in a small town in Iowa.

Wozendorf is a striver growing up, and he gets into college where he studies

filmmaking.

His talent for showmanship lands him a job shooting a PR piece for the American

Soybean Association in 1973.

That year, prices for commodities like soybeans and grain are soaring.

Traders are making a killing.

All of a sudden, stocks were going down, so everybody kind of leaned to futures,

the new thing, to make money.

Everyone was excited about Futures Markets. It got me involved in

an interest.

For Wozendorf, playing the market is more than an interest.

It becomes a calling.

By 1980, he gives up filmmaking to work as a consultant for Futures Investors.

He then opens Wozendorf & Associates from the basement of his Cedar Falls

and begins trading commodities for his clients as well.

I decided to set up my own broker capability, and a large New York bank

of my customers, a large oil man from Texas.

So these were big -time commercial users.

In the futures markets, if you want it as an investment vehicle, it can be

But most people are looking for a little more excitement, a little more action,

and they can get it, for sure.

Sometimes it's all risk and no reward, as millions of investors learn the hard

way on Black Monday.

It is a day that will be in bold print and history books.

It's October 19th, 1987, when the stock market crashes and the Dow Jones suffers

its greatest one -day decline ever.

Multitudes of brokers are panicked.

But not Russell Wozendorf. He's sitting pretty.

And so were his clients.

That's because he urged them to sell their shares ten days earlier.

It was just a matter of looking at the world as it was and seeing that the

potential was there. And the extent of the crash was actually quite easy to

predict because it was just a direct mathematical extrapolation from the 1929

crash. Financial writer Daryl Jobman knew Wozendorf and says he probably had

both vision and luck on his side.

I see lots of gurus come along and they always predicted the crash.

I mean, you make enough predictions, some of them are going to be right and

you're going to look like a genius.

Genius or not, Wozendorf's fortunes improved dramatically after his October

prediction.

I had spoken to a group in Hong Kong in September and practically got booed off

the stage.

In November, I spoke to a group in the Cayman Islands, and I literally could

go into the bathroom without somebody following me in and trying to open an

account. By 1990, Russell Wozendorf moved to Chicago, the epicenter of the U

future markets, and rents an office next door to the Chicago Mercantile

Exchange.

He renamed his company Peregrine Financial Group, or PFG, after the

Falcon, one of the world's fastest predators.

In 1992, he incorporates Peregrine as a Futures Commission Merchant, or

FCM. Unlike a broker, an FCM has the authority to hold and trust

its customers' money.

In becoming an FCM, a Futures Commission merchant, Wassendorf was taking the

next big step.

But he faces a potential game changer the following year. For reasons unknown,

he has a falling out with a major investor.

There had been a partner of his that put in about $200 ,000. That partner wanted

out.

The law suddenly leaves Peregrine short of the cash level required by

regulators.

I knew the industry was pretty well stacked in the favor of the larger

and the smaller firms were being quickly weeded out by the regulators.

We heard this a lot, you know, when we talked to Russ. He was always talking

about the regulators being on his back. Too much regulation.

Wozendorf accuses the Commodity Future Trading Commission, or CFTC,

of putting him through the wringer after his investor backs out.

The CFTC is demanding that he come up with an even higher level of capital

before, or they'll force him to shut his doors.

He felt that he was being persecuted by the CFTC.

He did not feel that he should have had to come up with this extra capital to

keep his business running.

Wozendor finds himself at a crossroads.

Doesn't have the money.

But what he does have is $2 million in customer funds, money that belongs to

individual investors and speculators.

These are called segregated funds, and the name is very much apt. They're not

your money to play with.

If he were to tap into these funds, he'd be committing a federal crime and could

serve up to 10 years in prison.

But Wozendorf feels there is no other choice.

He steals $200 ,000 of customers' money, then hides the evidence.

You make a decision to take an action that is against your morals, against

previous code of conduct. That was a decision that I made simply to save the

company at that time.

Even he admitted that his ego was too big to fail.

The gamble pays off.

He meets his required capital level, and regulators leave Peregrine alone.

A lot of things go on in the financial world, but touching those customer funds

is pretty rare and pretty extraordinary.

For Russell Wozendorf, it's only the beginning of a criminal journey that

span two decades.

Once that decision was made, it became irreversible.

Coming up on American Greed.

An entrepreneur with a groundbreaking idea joins forces with paragraph and

burned.

This guy would get your business and he would kill it from you.

And that was the truth. He did it over and over again.

In the mid -1990s, Chicago's commodity futures industry is on the brink of a

seismic change.

For almost 150 years, traders have battled in the pit using open outcry,

shouting and signaling orders to buy and sell everything from gold to soybeans

to pork bellies. But Russell Wozendorf, CEO of Peregrine Financial Group, is

ready to invest in the next frontier.

I directed the resources towards... online trading, which I thought was

the future of the industry.

It was a big step to go electronic at the time when you had all of these

entrenched interests wanting to preserve that open outcry trading.

A lot of the firms didn't want to trade electronically right away.

But open pit trading is no match for the Internet.

You could quickly see where things were headed. The retail client wanted it to

happen because they wanted their orders filled instantly. They didn't want to

wait three hours to get their fills back.

In February 1998,

Russell Wozendorf meets another entrepreneurial broker named Jerome

Bressert has developed one of the first online trading programs for consumers to

send their orders directly to the exchange floor.

Ressert software is ahead of its time, and it's exactly what Wassendorf is

looking for.

We met at an office, and I logged in with his computer, and we did trading

there for about five minutes.

And he was so impressed, he wanted to buy my company the next day.

Ressert says his partners aren't ready to sell, so Wassendorf makes him a

personal offer instead.

He promises Bressert a 50 % share of Peregrine's online trading division if

joins the firm.

Bressert accepts the offer.

Russ came across as very wealthy. He came across as someone that you would

trust. He put his arm around you. He shook your hand.

He gave you that good feeling that you're going to be safe with him.

In a few short months, Bressert and his web programmer create a new online

trading platform for Peregrine. They call it Best Direct, Best being short

Bressert Electronic Systems Trading.

It's among the first to connect consumers directly to the Globex network

Chicago Mercantile Exchange.

Globex is international and allows nearly round -the -clock trading.

Once we connected Best Direct to Globex, it took half a second to go on.

It was amazing. People were shocked. That was the very beginning that we knew

had something that was great.

Walsendorf realizes that he's hit the jackpot when Best Direct goes online in

1998.

Kerrigan's trade volume explodes.

The online division became 95 % of all PFG's business.

We went from making literally $500 a day in commissions to $50 ,000 to $200 ,000

a day.

But as Wozendorf beefs up his staff and moves Peregrine to a lavish new

headquarters, Bressard says the company changes for the worse.

He grew too fast.

His ego...

was so big that he wanted this office before we could actually afford the

office. He would start yelling at people. He started yelling at me. This

beginning of where they were trying to get me out of the company, and he was

trying to get his son in the company.

Bressert says that by December 2000, Wassendorf strips him of his main

turning them over to his 30 -year -old son, Russ Jr.

And then I was still asking, where's my option agreement?

He did give me a 50 % option on the company, but I never got the signed

I don't think his ego would allow me just to have half his company.

He didn't expect this. It was a very unexpected growth in the division.

Bresert resigns in April 2001.

He says he never got his fair share, potentially tens of millions of dollars.

But he realizes he doesn't stand a chance in court without a signed

He did steal my software.

He would bring people in, get all he could from you, and then try to get you

and keep it for himself.

And that's what he did.

Next on American Greed, Wozendorff pours a fortune into real estate, publishing,

and charity.

There's just one problem.

It was customer money, and he treated it as though it was his.

By 2004, Russell Wasendorf, CEO of Peregrine Financial Group, is riding

on the success of his firm's online trading platform.

Peregrine's trade volume has shot up 400 % in the past four years.

It's a triumph for a relative newcomer in Chicago's cutthroat futures industry.

So says Nick Ivarone, who served as outside counsel for Peregrine since the

beginning. What mattered to Russ was to appear to be the person that's built the

most successful firm.

At this point, the 56 -year -old is launching one new business venture after

another, from a securities brokerage to a glossy trade magazine to developing

commercial real estate in Romania.

I knew we had great opportunities. At one time, Romania was the fastest

economy in Europe.

By the looks of it, Wozendorf has finally arrived.

Wassendorf was definitely among the more flashy people in the industry.

He wore a jeweled pinky ring. He always had a big smile.

He brought in big -name speakers to futures industry conferences.

He would bring in the likes of Ted Koppel, Barbara Bush, Alan Greenspan.

Tell me, Frank, thank you.

Your nation thanks you. We thank you. God bless you.

He could surround himself with these people and elevate himself in the same

He establishes Peregrine Charities as well, a foundation that donates

to children's medical research.

Russ came off as a very well -off man.

My perception was that, you know, he was putting money into these other ventures

from his own money.

Broker Paul Cavanaugh joins Peregrine in 2005 when the firm appears to be on the

rise with a staff of about 75 people.

Peregrine was really a marketing machine.

And that's really what's important to opening accounts in the futures

You have to start with good leads. And they had them. Not only does Peregrine

project wealth and industry savvy, it's got a reputation for integrity as well.

When it comes to financial regulations, Wozendorf is known to hold his employees

accountable.

PFC required all brokers and operations people to maintain a very high standard.

And it was kind of above and beyond, I think, what was needed. He was always

outspoken about how much better he ran his firm and how

his firm followed the rules.

But Russell Wozendorf's carefully crafted image is a cover for his

misdeeds behind the scenes.

He wanted to make it look as though he was a wealthy and successful

in part in order to throw the regulators and others off the scent, to make sure

that they didn't look too closely or subject them to too much scrutiny.

According to Assistant U .S. Attorney Peter Deegan, Wassendorf has been

customer funds from Peregrine since 1993, when he embezzled $200 ,000 to

his company afloat.

In the decades since, Peregrine's client base has grown, and the firm now holds

more than $100 million of customer money on deposit.

Money that Wozendorf continues to steal to finance his Romanian real estate

deals, his celebrity events, and his charities, among other pursuits.

Whenever he had any need or any desire to pull millions of dollars out of his

company, he simply went right to customer segregated funds, pulled it out

there, covered his tracks by phoning up the bank statements.

Remarkably, he's become a one -man fraud master, using the simplest tools to

deceive his entire accounting staff and financial regulators.

He produces counterfeit bank documents that inflate the balance in Peregrine's

customer -segregated account and hide how much he's withdrawn.

He actually started by using a copy machine and doing a literal cut -and

job. on bank records and bank statements. As time went on, he started

computer software that allowed him to make alterations digitally in order to

generate convincing fake bank statements.

painfully simple. For one thing, the regulators really weren't scrutinizing

to the degree that they should have. Here I was depositing false deposits of

capital into the firm to the tune of several million dollars a year, and at

point did they ever ask me where the money was coming from.

It was literally coming from thin air.

From day one, he's kept the scheme his secret and his alone.

No one else at Peregrine knows.

Not even his son, who was the company president.

Wassendorf made it known that he was the only one who was allowed to receive

statements from the bank.

Wassendorf's employees say that he had an awful temper, that if anyone

questioned him about the bank statements, he would explode.

And so through intimidation, he really kept the secret under wraps.

Setting up that whole scam was too simple, way too simple. What wasn't

was living with the guilt.

And that tore me apart. I was insomniac. I drank too much. I did all

those things that are self -destructive.

Yet his conscience isn't enough to stop him. As long as Peregrine continues

gaining new clients, Wassendorf uses the customer -segregated account like it's

his own money.

We're providing customers great technology.

Market analysis, and most importantly, superlative customer service.

By 2008, Peregrine is bigger than ever after buying out a rival firm.

It now holds almost $300 million in customer funds.

But financial disaster is brewing in the U .S.

When American Greed returns.

The economy goes into free fall and Peregrine starts bleeding money while

Wozendorf continues to spend wealth.

People didn't understand where he was getting all his money from.

It's May 2008, and Chicago brokerage firm Peregrine Financial Group is

celebrating a milestone.

Sustaining your success is not only our mission, it's our obsession.

Ten years after launching its online trading platform, the company rebrands

itself as PFG Best.

The firm, led by Chairman and CEO Russell Wozendorf, looks like a winner

in the futures industry, including independent broker Carly Garner.

She's opening a small trading office in Las Vegas and has to find a futures

commission merchant to clear her trades.

PFG, because it was a family operation, was very appealing to us.

Our mission at PFG is to empower our customers.

They worked hard to educate their clients. They had magazines. They had

webinars. They had all these things that...

let people know what the futures markets were all about, and that's exactly what

we wanted to be a part of.

Garner wants a company that she can trust, and she decides PFG looks like

best bet.

It wasn't a decision that was made lightly. I had made a number of phone

around the industry, and everything that I heard was, you know, fabulous.

She signed with the firm that summer.

But as careful as she is, Garner will still get blindsided by the likes of

Russell Wozendorf.

Wall Street at least is bracing for a bankruptcy by Lehman Brothers.

When September 2008 hits, everything changes.

Financial powerhouses begin collapsing, including Lehman Brothers and Washington

Mutual.

Anxious investors go on a selling spree, and the Dow plunges more than 2 ,600

points in October.

It's a difficult time for anybody in the financial services industry because...

Nobody has money to invest.

Customers were scared. They don't want to trade, and they don't want to open

accounts. To make matters worse, the Federal Reserve slashes interest rates

almost zero.

Typically, brokerage firms like PFG earn interest on their customers' accounts,

and they rely on that for revenue, but not anymore.

All the revenue streams went towards zero.

The financial crisis torpedoes PFG's bottom line.

And commodities traders suffer well into 2009.

For all of the proverbial blood in the streets, however, Russell Wassendorf's

ambitions remain unabated.

In fact, he forges ahead with his boldest plan yet, the construction of a

$24 million corporate headquarters in Cedar Falls, Iowa.

Cedar Falls is near Marion, Iowa, where Wassendorf grew up.

It has a main street that runs right through the center of town with a barber

and a candy shop and an old hotel.

Russell Wassendorf is going to come into Cedar Falls and build a sparkling new

headquarters, hire a bunch of people, make Cedar Falls sort of the new

for a certain part of the futures industry.

It's very much an audacious move.

In Chicago, he was one fish in a giant pond.

When he moved his operation to Iowa, he was the biggest fish in a small pond.

Wassendorf built a state -of -the -art facility, large enough for 300 employees

on 22 acres of land.

He announces its grand opening in September 2009.

I'm Russ Wassendorf.

I'm chairman and chief executive officer of PFG Best. I want to welcome you to

One Baraboon West.

Within the structure itself. It was like Field of Dreams.

He felt if he built it, the brokers would come.

But they didn't.

Very few brokers followed him out to Iowa.

So that building had a lot of space.

Most of PFG's brokers have chosen to stay behind at the Chicago office, where

Wozendorf's 39 -year -old son, Russ Jr., runs the show.

There's growing strain between father and son now.

Russ Jr.

has fought the Iowa move ever since his father proposed it.

There's no business reason for doing it, and Russ Sr. just summarily dismissed

Russ Jr.'s opinions and other people's opinions.

Cedar Falls, meanwhile, gives Wozendorf a hero's welcome.

He relishes playing the part of a local boy made good and spends money

extravagantly to show it.

At his Cedar Falls home, he builds a massive pool with a retractable glass

at a cost of more than $1 million.

He takes to the skies in a private jet that he purchases for his trips to

Chicago. And he opens an Italian restaurant called My Verona that uses

ingredients from his organic farm and touts its upscale cuisine.

He took his restaurant staff on an all -expenses -paid trip to Italy to learn

about medieval sausage -making techniques and wine pairing.

He wanted to give a top -class experience there in Iowa.

For anyone who inquires about the source of his wealth, Wassendorf says that he

made a killing in Romanian real estate.

I remember him telling me that he had the largest construction company in all

Eastern Europe, and he was worth hundreds of millions of dollars.

But it's around this time that fate deals Wassendorf an unexpected hand.

He's diagnosed with esophageal cancer, and the news shakes him profoundly.

There's enough of a wake -up call that I considered all aspects of my life,

including my marriage.

In December 2010, he and his wife of 34 years filed for divorce.

I always had the feeling I was living on borrowed time anyway. My father died

when he was 50, and I guess that's one of the reasons I lived a rather fast and

furious life.

As it turns out, the diagnosis is a mistake.

Wassendorf is cancer -free.

And yet, his worst troubles are only beginning.

When American Greed returns, see how an employee's tiny slip -up almost exposes

his entire fraud.

Hear more about Russell Wassendorf's motives at AmericanGreed .CNBC .com.

Feeling greedy?

Want more than your share of behind -the -scenes dirt?

Follow at AmericanGreedTV on Twitter.

We'll be right back.

It's 2011 in Cedar Falls, Iowa.

Russell Wozendorf, chairman and CEO of Peregrine Financial Group, has been

stealing money from his customers for the past 18 years.

He's embezzled more than $200 million and covered his tracks by switching real

bank statements with forgeries.

He told his staff that the bank statements for the customer -segregated

were to be delivered to him unopened and that only he would have access to

those. His scheme worked.

but only as long as he controls the communication flow with the bank.

His iron grip finally slipped, appropriately enough on Friday the 13th

2011.

The circumstances, utterly routine.

It's during an audit when a PFG employee emails a request to U .S. Bank for an

account balance and helps to put the bank in contact with a regulator at the

National Futures Association, or NFA.

Her intent is to make the audit go faster, but she unwittingly exposes just

much customer money is missing from PFG.

U .S. Bank told the NFA and the Peregrine employee that Peregrine's

balance was around $7 million.

That was about a $200 million shortfall.

For the first time in almost two decades, a regulator gets a look at

account balance.

I found out it happened within minutes after it happened. I obviously thought

the jig was up.

That afternoon, Wassendorf contacts his bank to try to undo the damage.

I gave one of the bank officers the song and dance that it was sent by accident.

It was just, you know, this happened. Don't worry about it. It's nothing.

And they bought my story.

Meanwhile, he fabricates a new bank statement showing a phony balance of

million.

He gets ready to fax that statement to regulators the next business day.

On Monday morning, he called up the NFA auditor and said the bank had made a

mistake. They're going to be sending you a new verification form. And when he

sent it, he changed the fax header on his fax machine to make it look like it

was coming from the bank.

The NFA accepts the forgery at face value, and Wassendorf dodges a bullet.

Russ thought that the jig was up. He was apparently shocked that the NFA didn't

catch him.

Another type of damage that Wassendorf cannot seem to reverse, however, is

continuing drop in profits and sinking morale.

He's transformed his Iowa headquarters into a call center for opening online

accounts.

but at the expense of his brokers in Chicago.

It felt like they wanted to phase out the brokers and just become an online

trading house. All of the leads went to Iowa, where the customer service reps

were. All the phone numbers on the website rang in Iowa. So rather than

brokers a percentage of the commissions, the house would keep all the

commissions. The last year, a lot of the brokers were just fading away.

They were leaving.

By the end of 2011, even Wassendorf's son and PFG president, Russ Jr., is

planning an exit strategy.

Russ Jr.

has been at odds with his father, both professionally and personally, since his

parents divorced.

His father has also begun dating another woman, whom he intends to marry.

The disagreements over how to run the company had intensified.

The personal situation had really deteriorated.

And so he wanted to get away from his father.

But fate intervened, and suddenly the Wassendorffs are faced with a potential

train wreck.

In February 2012,

financial regulators hit PFG with a $700 ,000 fine accusing four of its brokers

of misconduct.

The charges stem from a federal investigation into Minneapolis

trader Trevor Cook.

who's convicted of bilking investors of $194 million in a foreign currency

fraud.

Cook has set up many accounts at PFG to clear his trades and illegally

commingled funds between them.

Regulators said that PFG was clearly, at the very least, not supervising its

brokers. These trades should not have gone through.

You know, commingling of funds in the futures industry is just a very bad

offense. It just shows that, you know, you're having issues.

To make matters worse, regulators banned PFG from signing up new brokers for a

period of two years.

So that's really when things got bad, in my opinion. And, you know, some of my

associates left the firm because of that. I almost went with them.

By early May, PFG is clearly struggling.

The company announces a 20 % pay cut for all its employees and several layoffs.

The following month, regulators from the National Futures Association begin

their annual audit.

This time, they tell Wozendorf they're introducing a new auditing system.

It's electronic and will give them direct access to PFG's bank accounts.

The online technology that helped make Wozendorf now threatens to undo him.

For 20 years, he had been doctoring bank statements with physical paper. He knew

the jig was up. With electronic account verification, that really was the one

thing that he couldn't hide from.

But regulators need Wassendorf's consent before they can proceed.

He refuses to give it to them and stalls for time over the next week.

I could very easily have disappeared, but in doing that...

I felt that the federal prosecutors would have then gone to lay the blame

innocent people. And I didn't want to put my past employees or my son in that

type of situation because they knew nothing about what I was doing.

Wassendorf says he wants one last bit of happiness before his time runs out.

So he takes his fiancée to Las Vegas on the weekend of June 30th.

They elope at a private ceremony at the Bellagio.

This was sort of the beginning of the end for Wassendorf.

He was, you know, putting all his affairs in order ahead of his planned

Eight days later, on Sunday, July 8th, Russell Wassendorf emails financial

regulators. He finally gives them consent to view PFG's bank accounts

Then he sets out a number of items in his office for authorities to find.

I was very careful to keep all the evidence of my crime. I kept all of the

original bank statements that I had forged, and then I had a thumb drive

they could access and trace the money.

By 8 o 'clock the next morning, he drives into a wooded area behind PFG.

A short time later, one of his employees calls 911.

Up next.

There's a car behind our building with a tube from the exhaust into the window,

and there's a person inside.

Okay. And the car's running.

July 9, 2012,

Cedar Falls, Iowa.

A desperate call to 911.

Okay, are you watching it from the... Yes, I'm watching it right now. I've got

group of people out there.

Just before 8 a .m., employees at Peregrine Financial Group make a

discovery.

Ma 'am, can you tell me what's going on?

Russell Wassendorf, chairman and CEO, has attempted suicide.

He's overdosed on sleeping pills while sealed inside a car full of exhaust

fumes.

Do you have contact with anybody to see if he's breathing or not?

Oh, my God.

Paramedics rush him to the hospital, and police recover a suicide note and

confession letter from inside the vehicle.

I've committed fraud, the letter states. I have been able to embezzle millions

of dollars from customer accounts at Peregrine Financial.

At that point, a federal criminal investigation begins.

He had laid out in some detail what he had done.

Everyone was incredulous that this was true, so the next thing to do was to go

down to the bank, and sure enough, it was true.

Investigators find $5 million in PFG's customer -segregated account.

That's $200 million short of what Wassendorf had everyone believing was

Commissioner Bart Chilton of the Commodity Futures Trading Commission is

notified immediately.

This is $200 million of customer funds. This isn't big corporations. These are

average folks who had their money invested with Peregrine. There was a lot

shock, but more importantly, I was thinking, how are we going to get their

back? That afternoon, regulators freeze PFG's trading positions.

The company doesn't have the capital to stay open, and it declares bankruptcy

the next day.

More than 200 employees are suddenly told their jobs are gone.

I think the hardest thing for Russ Jr.

was he had to explain to the employees what was happening, that the company was

going down and that Peregrine was finished.

We knew the firm was having issues, but nothing of that nature. I mean, nobody,

I don't think anybody could comprehend that, you know, he had taken over $200

million, attempted suicide. I mean, that was just a blow, just a shock.

The damage spreads far and wide.

And in Las Vegas, broker Carly Garner fears that it will jeopardize her own

business. She's among hundreds of outside brokers that cleared trades

PFG and trusted the firm with their clients' money.

Because all of our assets were at PFG, I knew that we would be starting from

scratch. Our clients were left with, I assumed it to be pennies on the dollar.

Garner, who opened her business with zero clients four years ago, represents

more than 300 now.

Altogether, their assets amount to $4 million, all of which was on deposit at

PFG.

Garner knows they may never see that money again.

It was a nightmare. There was nothing we could do, but our clients wanted

answers, and we didn't have them to give to them.

Getting very disoriented.

Wozendorf, seen here in video taken at his bedside, is soon visited by FBI

agents. He's in stable condition after a near -fatal overdose of sleeping pills.

Authorities later place him under arrest on charges of making false statements

to federal regulators.

Eventually, Wozendorf leads them through his 20 -year scare.

He sat down and was willing to talk about how he'd done it.

but also to talk about AFCA and where they were.

Unfortunately, when you would ask what happened to all the money, the answer

too often was, well, it's gone.

The court appointed receiver and trustee tally Wassendorf's remaining assets and

sell them off.

But they come nowhere close to recouping the funds that he stole from 13 ,000

customers.

All told, PFG's customers have received roughly 30 % of their money back so far,

but they don't expect to see the rest.

They include Carly Garner's clients.

Many of them have told me they'll never trade commodities again, and I don't

blame them. This is something that people don't bounce back from very

In September 2012, Wassendorf pleads guilty to embezzlement, mail fraud, and

counts of lying to federal regulators.

He maintains that he acted alone, and investigators haven't found the evidence

to prove otherwise.

At the time of his sentencing, we didn't believe any other charges would be

brought against anybody.

In January 2013, a U .S. District Judge sentences Russell Wozendorf to the

maximum prison term, 50 years in a federal penitentiary.

He will be eligible for release by the time he's 107.

But many say that punishing Wozendorf isn't enough.

Investors need better protection.

It's mind -boggling how easy it was to fool the regulators because they weren't

auditing electronically.

The fact that this was able to go on for as long as it went on is as much an

indictment of the regulators as it is of Russell Wassender.

The CFTC is taking steps to improve oversight of customer funds.

The thing that we have in place now is that we have electronic access to bank

records that we can check 24 -7, 365, to ensure that customer funds are where

they're supposed to be all the time. That doesn't mean that there's not more

be done. There is.

Today, the repercussions of PFG's collapse are still being felt.

And customers aren't the only ones that paid the price.

For brokers, you know, who played by the rules, this really wasn't fair.

Not only do we lose our customers and our customers lose their money, but we

have the additional taint or stigma of being associated with Watzendorf.

And it's going to take a good amount of time to get that off.

Every moment he was doing this, he was playing with people's lives and careers

as well as people's money. And he didn't care.

Wassendorf now expresses his remorse and says he accepts the punishment he's

been given for his hubris and greed.

I'm deeply sorry for what has happened. I feel very guilty for what I've done,

and I deserve the punishment I'm getting.

I was a horrible hypocrite, and because of that, I don't expect to be forgiven.

I've lost my son's trust. I've lost his love.

I don't believe I'll ever see my grandchildren again.

And I'm very, very sorry about that.

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