CHICAGO, July 13 (Reuters) – Bankrupt brokerage Peregrine
Financial Group Inc, which collapsed this week after its founder
was accused of fraud, can retain 56 employees for two months in
order to wind down its operations, a bankruptcy court ordered on
Friday.
Judge Carol Doyle granted a motion to keep the company going
and pay the employees until Sept. 13. Neither Russell Wasendorf
Sr, the owner and founder whose attempted suicide on Monday set
off the dramatic collapse of the company, nor his son Russell
Jr, the company’s president, was among the employees.
“The Trustee believes that the continued operation of the
debtor’s business is both necessary to maintain the value of the
assets and to allow him to maximize the recovery from the
liquidation,” trustee Ira Bodenstein said in the filing.
Bodenstein can ask the judge to extend the company’s
operations after two months.
Wasendorf Sr was reportedly in a coma earlier this week
after attempting to take his own life, setting off a chain of
events including the freezing of his business, the alleged
discovery of an over $200 million shortfall in the broker’s
client funds and a Federal Bureau of Investigation enquiry.
His current status is unclear. Two employees said they were
told earlier this week that he was conscious, but Randall
Lending – who is lawyer for the receiver for Wasendorf Sr – said
on Friday he was “told” Wasendorf was still incapacitated. He
did not say who had told him. The Iowa City hospital has
declined to comment on his condition this week.
Separately, Michael Eidelman, who was originally appointed
to be the receiver for both Peregrine and Wasendorf, said late
on Thursday that Russell Jr had relinquished power of attorney,
which his father had signed over only last week.
The trustee does not intend to solicit new customers or
market Peregrine services to the public, according to the
filing.
On July 10, Peregrine Financial Group filed to liquidate
under Chapter 7 of the U.S. bankruptcy code, with between $500
million and $1 billion of assets, between $100 million and $500
million of liabilities, and between 10,000 and 25,000
creditors.
The Commodity Futures Trading Commission (CFTC) earlier
alleged that Peregrine Financial Group and its owner defrauded
customers and lied to regulators to hide a shortfall that now
exceeds $200 million.
The case is: Peregrine Financial Group Inc, Case No.
12-27488 U.S. Bankruptcy Court, Northern District Of Illinois
