Did they have an obligation to? Depends on how the custodial account is set up (which, if it's set up by a guy trying to scam money, I'm assuming there'd be little for US Bank to do). This is why large clients not only segregate their funds, but deposit at a custodial account.
For one thing, sweep excess cash. Time after time, it's the only strategy that sort of helps when some other guy holds your money; You know the account isn't FDIC ensured. You assumed the risk.
It doesn't really matter who the documents were addressed to... where did the NFA receive the address to mail the documents?? My conclusion is they received it obviously from Wasendorf, there is no other reasonable explanation. This is so absurd it almost defies logic how he got away with it for so long. That is really the only question that matters because it will clearly show there was no such thing as an independent audit taking place at all. Also, the towards the end, NFA was "asking" Wasendorf to "allow" them to check the balances electronically. Does this make any sense at all? Were they just doing a CYA after it was plainly clear he was a fraud all along? Why would the NFA need to ask to verify an account balance electronically anyway. Incredible.
========= Sam; He did seem to enjoy his own picture a good bit.LOL I hope you analyze markets better than people; as if a male ego , basement business start,& wedding ring makes someone dshonestt SFO mag was a bit elementary, but sometimes helpful; not sure why you kept them lying around.Maybe like Rich Dennis they say, kept WSJ,[ stacks of wall Street Journal ]for chairs in Chicago residence.
The way I read that was the NFA was transitioning from a manual system used by all the companies they regulate to an electronic system for all the companies. As they rolled it out, they had to get approval from each company because of legal issues with the NFA just showing up at someone's bank demanding information about their accounts without an approval letter of some kind. PFG was withholding approval, for obvious reasons. That's just my take, though, and I don't know that for sure, although it seems to make sense. The NFA had one system with an exploitable loophole in place. Only this one guy (so far as we know) was actually exploiting the loophole. When the NFA asks everyone to move over to a system without the loophole, everyone but this one guy agrees. Because the NFA can't force the issue, it raises a red flag. The guy finally relents to the change and tries to kill himself because he knows the game is up. Make sense? If this is how it played out, the question is whether there are any other FCMs who resisted this system change and what is their current status?
You guys are being way too lenient with the one entity who has all the legal power and is charged with law enforcement - the CFTC. Can anyone dispute that the CFTC has the legal authority to query the holding bank directly with respect to verifying the FCM's reported figures ? Would the CFTC need to show probable cause and get a search warrant ? It seems to me that a CFTC Auditor should be able to do that in the normal course of his duties without a warrant.
No doubt about it. Our entire regulatory system is a farce. None of us should have any illusions about it anymore. We are all on our own now.
Absolutely agree. My only point would be that the process to gather evidence (in this case, for the NFA to realize this guy was not going to just rubberstamp any process change like everyone else was doing) takes time. The guy and his firm had a good reputation in the industry, so it was probably that he was skating by on that and blowing off the NFA while they just thought he was too busy to respond. Maybe if this had been a firm run by some nobody, it would have been brought to the CFTC's attention immediately, but because it was a guy everyone thought was on the up and up, it wasn't. It would be different if the CFTC was the first line of defense, but the NFA appears to play that role as well, so the split in duties makes for inconsistency. Hindsight's always 20/20. In a completely different context, how many serial killers get away after being questioned by the police? A lot of times, they have a reputation as a decent person and a plausible story and that's all it takes to shift the focus off of them. They say even the best FBI experts can't always catch liars consistently. While one wants to assume that as part of the NFA's audit training, they are taught to assume an adversarial stance toward the audited party from the get-go, it's not something many people can do when the chips are down. At the end of the day, being too much of a p*ssy to confront the CEO of a non-compliant regulated entity is not a defense, but yet it happens.