The trustee for Peregrine Financial Group is considering bringing claims against JPMorgan Chase (JPM) and U.S. Bancorp (USB) for allegedly permitting the embezzlement that brought down the brokerage last summer.
Trustee Ira Bodenstein sees evidence that the banks "breached a variety of duties" to Peregrine's customers and is investigating "a number of viable claims" against them, he wrote in a complaint filed Wednesday in an Illinois bankruptcy court. The court granted Bodenstein's request to delay a class-action suit against the estate while it investigates claims against the banks as well as the brokerage's former management.
The banks allowed former Peregrine Chief Executive Russell Wasendorf to use segregated customer accounts as a "personal piggybank," the class-action filed by former customers in December alleges. It accuses U.S. Bank of fraud and negligence and JPMorgan of breach of contract. Wasendorf is serving a life sentence in federal prison for stealing more than $215 million from Peregrine's customers over nearly 20 years.
The two banks' motion to dismiss the charges in the class-action suit will be heard on May 13.
The Cedar Falls, Iowa, brokerage, which was one of the largest nonbank futures commission merchants in the country, collapsed last July in the midst of a Commodity Futures Trading Commission probe of Wasendorf's use of customer funds. Wasendorf attempted suicide on July 9, leaving a note in which he confessed to embezzling millions in customer funds.