The Commodity Futures Trading Commission has sued U.S. Bank for its role in the Peregrine Financial collapse, alleging that it failed to properly handle the failed brokerage's customer accounts.

The CFTC's complaint, filed Wednesday in an Iowa district court, says that the Minneapolis bank, a unit of U.S. Bancorp (USB), allowed Peregrine's owner to raid what should have been a segregated customer account for his own benefit. The agency claims that the bank let Russell Wasendorf, Peregrine's founder, use millions of dollars of customer money to pay for personal expenses like his private airplane and his divorce settlement, and that it accepted customer money as security it made on loans to Wasendorf, his wife and his construction company.

The complaint says Wasendorf embezzled more than $215 million from 24,000 customers over two decades. Peregrine had had a depositary account with U.S. Bank since 1992, and more than $308 million of customer money had been deposited with the bank over the last eight years, the complaint said.

U.S. Bank said in an emailed statement to American Banker that the lawsuit "is without merit and represents an inappropriate attempt to reassign blame to U.S. Bank."

"U.S. Bank was also a victim of the same fraud - one that the CFTC failed to detect," the statement said. "The bank did nothing wrong and will defend itself vigorously."

Peregrine Financial was a brokerage and futures commission merchant that collapsed last July, after the CFTC began probing Wasendorf's use of customer money. Wasendorf attempted suicide in his home on July 9, leaving a note in which he confessed to the embezzlement, according to reports. In January, he was sentenced to 50 years in jail and ordered to pay more than $215 million in restitution.

The trustee of the Peregrine estate said last month that it may bring charges against U.S. Bank and JPMorgan Chase (JPM), which also held Peregrine funds, for failing to segregate customer money.

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