* CFTC lawsuit says bank aided Peregrine customer losses
* CFTC opposes motion to dismiss lawsuit, wants restitution
* Lawsuit first against a bank tied to Peregrine
By Dena Aubin
NEW YORK, Aug 15 U.S. regulators on Thursday
asked a federal court not to dismiss their lawsuit against a
bank tied to the blow-up of brokerage Peregrine Financial,
saying the bank helped bring about millions of dollars of losses
for Peregrine customers.
At issue is a lawsuit filed by the U.S. Commodities Futures
Trading Commission in June against U.S. Bank N.A., a unit of
U.S. Bancorp, based in Minneapolis. The lawsuit accused the bank
of letting Peregrine founder Russell Wasendorf Sr secure loans
against money that belonged to his brokerage's customers.
The lawsuit was the first against a bank tied to the
collapse of Peregrine, which filed for bankruptcy protection in
July 2012 after Wasendorf confessed to bilking his clients of
more than $100 million in a nearly 20-year-long fraud.
Wasendorf began serving a 50-year sentence in February.
Attorneys for U.S. Bank filed a motion to dismiss the
lawsuit earlier this month, saying the CFTC was trying to shift
responsibility for a Ponzi scheme to the bank, even though the
bank itself was a victim of the scheme.
Attorneys for U.S. Bank could not immediately be reached for
comment on Thursday.
In a response to the lawsuit in June, U.S. Bancorp spokesman
Tom Joyce denied the allegations and said the lawsuit was "an
inappropriate attempt to reassign blame to U.S. Bank."
In its lawsuit, the CFTC said the bank knowingly facilitated
the transfer of millions of dollars of customer funds to pay for
Wasendorf's private jet, his restaurant and his divorce
settlement, among other things.
The lawsuit, filed in the U.S. District Court for the
Northern District of Iowa, said the bank had a segregated
account for Peregrine's customer funds but treated the account
as if it were "a Peregrine commercial checking account."
In a court filing on Thursday, the CFTC said more than $325
million flowed through the segregated customer account between
May 2005 and June 2012, and that Wasendorf misappropriated about
$215 million of that amount.
U.S. Bank knew the account held customer funds but executed
withdrawals on Wasendorf's behalf anyway, the CFTC said.
Restitution is appropriate because the customer losses would
not have occurred if the bank had not executed the withdrawals,
the CFTC said.
The case is: U.S. Commodity Futures Trading Commission vs
U.S. Bank, N.A., U.S. District Court, Northern District of Iowa,