Russell Wasendorf Sr could face a sentence of up to 50 years in prison if an Iowa judge accepts a plea agreement reached between the former head of Peregrine Financial Group and US prosecutors.
The futures brokerage run by Mr Wasendorf collapsed in July soon after a $215m shortfall in customer funds was discovered after he attempted suicide and confessed to having run a multiyear fraud.
Mr Wasendorf agreed to plead guilty to one count of mail fraud, one count of embezzlement of customer funds and two counts of lying to regulators, prosecutors said at a detention hearing in an Iowa court on Tuesday. He could face a maximum sentence of 50 years imprisonment if the agreement is accepted by the court.
Mr Wasendorf had pleaded not guilty in August to 31 counts of misleading federal regulators. A ruling on the plea agreement could come as early as this week, prosecutors said.
Dan Roth, president of the National Futures Association, an industry regulator, said: “We would certainly hope the sentence imposed by the judge will reflect the gravity of the crime. It is important to deter these types of violations by vigorously enforcing the law and we would hope whatever sentences he gets does that.”
As the front-line regulator for Peregrine, the NFA came under criticism for not discovering the $215m shortfall in customer segregated funds in Peregrine’s accounts during its routine checks.
Mr Roth said the NFA has made changes to its regulatory process in the wake of the Peregrine and MF Global scandals that have damaged market confidence in the safety of customer funds.
Any bank account used by a futures broker, such as Peregrine, to hold customer segregated funds must provide “direct online, view only access” for regulators to monitor at any time, Mr Roth said.
He added that the NFA and the CME, the operator of the world’s biggest futures exchange, are working on additional safeguards for deposits that are not held in banks.
Peregrine’s bankruptcy trustee said last week he plans to return $123m to former customers, who have not had access to their funds since the company’s collapse.
However, federal regulators at the Commodity Futures Trading Commission, which has filed a civil suit against Mr Wasendorf, urged that the payout be postponed until further examination of the company’s records.
In his first public statement since the company’s collapse, Russel Wasendorf Jr, its president and Mr Wasendorf’s son, said: “My father will now rightfully have to endure the consequences of his actions which caused so much turmoil to PFG’s customers and the tremendous pain that he inflicted on so many loyal PFG employees.
“My priority is to assist the trustee and receiver in assisting PFG’s customers to recover as much of their funds as quickly as possible,” he said.