A unit of Minneapolis-based U.S. Bancorp has agreed to pay $44.5 million to settle a class action brought by former customers of brokerage Peregrine Financial Group, which failed in 2012 after its funds were siphoned off in a long-running fraud.
Disclosed on Thursday in a filing in an Illinois federal court, the proposed settlement resolves claims that the bank let Peregrine founder Russell Wasendorf Sr. treat an account set up for brokerage customer funds like a personal checking account, diverting money for himself and his other businesses.
"We are pleased to have reached a resolution regarding Peregrine Financial Group," U.S. Bank spokesman Dana Ripley said in an e-mailed message. Ripley declined further comment, citing terms of the settlement.
Ripley said the settlement will have no impact on the company's second-quarter financial results.
U.S. Bank, the banking unit of U.S. Bancorp, was accused in the lawsuit of fraud by omission, breach of fiduciary duty, and aiding and abetting violations of the Commodity Exchange Act.
The lawsuit said Wasendorf misappropriated funds from an account at U.S. Bank that was supposed to be used exclusively for the benefit of Peregrine customers.
Wasendorf is serving a 50-year sentence after pleading guilty to embezzling more than $215 million from thousands of Peregrine customers in a nearly 20-year fraud.
The futures brokerage filed to liquidate in 2012 after regulators accused it of misappropriating customer money, dealing a blow to confidence in the U.S. futures industry just months after the larger MF Global collapsed.
