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Thanks for mentioning that here - I wasn't aware of that as an IB customer. Definitely something I'll need to look into. Thanks again!
I thought, perhaps somewhat naively, that it was a good case such firms are privately owned and run by the founder (or founder's family). I figured that, if you worked at your family's firm, you would be more prudent than if you're one of the thousands employees at a big, "face less" company. Or that if you build something yourself from the ground up, you would be very risk-averse and oriented on the long-term of your company.
Apparently I was wrong - but I still can't understand well why the owner of a company that he worked 30+ years hard for to establish, does such a thing. What was he thinking?
Quote from that article:
So apparently, there were at least two other people besides Wasendorf that weren't involved but very knowledgeable about these irregular actions. I'm wondering why these people didn't raise any red flags with the regulators - such a thing can be done anonymously I assume?
The thing I personally find the worst in this case, besides the fraud itself, is that other people just didn't seem to care. The regulators apparently did the bare minimum that was required by American law (and left their work at exactly five o'clock ) and the sources (apparently working at PGFBest) just shrugged their shoulders and thought "oh it will be okay, I can't be bothered".
At least, that's how it looks to me (but from the outside it's always easy to judge).
Edit: in defence of the people working at the American regulators: they might be seriously understaffed, which causes them to not be able to do their job properly/completely. Let's not hope that's the case, since then a lot of brokers aren't regulated properly as it should be.
If you watch episodes of CNBC's "American Greed" you can see multiple cases of fraud by megalomaniacs or people who lost it when they found how to make big wealth of many millions no matter how illegal. Just my speculation, maybe Wassendorf at his age felt the need, however misguided and detrimental to the clientele, to build something bigger and lasting in his lifetime no matter the cost or risk (like Corzine). There was that news video mentioned earlier where he was investing in other businesses and public utilities outside of the brokerage.
Honestly, I don't know how anyone can live with themselves after doing something like this -- something he didn't need to do to be comfortable -- to so many people. How would someone feel sitting on their death bed with this kind of rip-off sitting on their shoulder?
If you've seen the movie "Rogue Trader", you can get an appreciation for how something can snowball out of control. I am not saying that is what happened here, as it seems to just be a case of greed, but it does remind us how an initial small "error" can turn into a huge one very quickly, and you can get caught up in it.
Like everyone else has pointed out, the issue here is not in stopping someone from committing a crime, as that is unlikely. The issue is protecting the innocent, in this case the depositors.
Hopefully we'll see some form of insurance as a result of this.
Also, I am not exactly clear on the exact responsibilities with this particular case when it comes to NFA and CFTC. I need to learn more about this. I know CFTC has brought suit, and as a governmental body has authority to prosecute. But it is not clear how the oversight worked on a day-to-day basis (to me), which seemed to fall more on the NFA, which has no real authority. The NFA is like being a member of the BBB...