Federal Court Orders US Bank to Pay Peregrin Trustee $18M
As you may have read, a Federal Court approved the settlement between US Bank and the CFTC regarding its handling of Peregrine's segregated customer account. US Bank will return $18M to the Peregrine estate while admitting no wrongdoing.
Many have questioned why the scope of the lawsuit was limited to $36 million in damages, while the original CFTC complaint sought full restitution to all Peregrine customers affected by the mishandling of customer funds, as well as disgorgement and other civil monetary penalties. In a series of pre-trial actions, the scope of the damages were limited to the amount of money US Bank transferred for the benefit of anyone other than Peregrine customers and the fees debited to the customer account by US Bank during the period covered by the complaint, 2008 to 2012. This was calculated to be $36M. Given the uncertainties of litigation, as well as the reduced scope of the complaint, we believe the $18M settlement is a positive development. There is still a class action pending with a broader scope which may yield additional recoveries for Peregrine customers.
The funds will return to the Peregrine estate, where the Trustee will decide how the funds are allocated. Since the funds were held for the benefit of 4d customers, it stands to reason that all $18M will be placed in the 4d account class of the fund of customer property of the Peregrine estate. If all of these funds are returned to 4d customers, it would raise their total recovery to around 50%. The final distribution of customer property by the Trustee is pending the resolution of remaining litigation, including the two remaining class action suits, as well as a final distribution plan which will require court approval.
Remaining Class Action Suits
There are two class action lawsuits still pending, the customer class action, which alleges breach of fiduciary duty, fraud by omission and violations of the Commodity Exchange Act and the introducing broker class action. It is our understanding that a settlement is close in the Introducing Broker class action, but we are unaware of any significant developments in the customer class action.
Beware Fake SPIC Claims for FXCM
Last month, retail forex dealer and Futures Commission Merchant FXCM experienced a liquidity event tied to losses in customer accounts from exposure to the Euro/Swiss cross trade. Many FXCM customers and CCC members received emails from debt traders offering to purchase SPIC claims from them related to the FXCM Bankruptcy. Please be advised FXCM is not a member of SIPC and has not filed for bankruptcy. FXCM reached a deal for funding with an affiliate of another FCM which would negate the need for a bankruptcy filing. The CCC is continuing to monitor that situation.
We hope that everyone is having a safe and healthy 2015. Please contact us if you have questions.