or money or turn it into solid gold. records the gold and silver investors god. call today eight hundred to avoid service goal. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and we are on vacation you see we've been broadcasting since october so that means were a little overdue for a break but in that time and in just the last few months we've interviewed so many amazing guests from jim grant to mark father to jim rickards even joining me as a co-host and we've covered so many topics that are relevant on any given day whether it's the fed or the eurozone crisis so we put together some of our very best and most popular episodes from the last few months for your viewing pleasure and the time while we're off and you can look forward to all new shows starting september fourth so mark your calendar and don't forget interviews can all be found

in their entirety on our you tube channel you tube dot com slash capital account but for now let's get to today's capital account. all right p.f.g. best according to its website which i took a look at as soon as i heard this news that has broken it has been ranked one of the nation's top fifty brokers for thirteen years it strives again according to its website to be an industry leader in innovation while at the same time recognizing that it is success rather is absolutely driven by the diligent and respectful care of customers and their accounts then yesterday customers received this e-mail

according to one that i spoke to due to a recent emergency involving russell watson door senior that's the firm c.e.o. a suicide attempt some accounting irregularities are being investigated regarding company accounts no customers are able to trade except to liquidate positions until further notice p.s.g. best is not authorized to release any funds so their money and segregated customer accounts was frozen and the national futures association a regulator took action saying it appears doesn't have sufficient assets to meet its obligations to customers at all detailed these allegations that on july ninth they received information indicating chairman may have also died bank records and they had heard p.s.g. had reported more than two hundred twenty five million of its segregated funds were on deposit at a us bank but then the f.a.a.

learned that rather than the two hundred twenty five million that p.s.g. had reported as being on deposit at a us bank just days earlier p.s.g. only had five million and it doesn't end there folks it goes back the n.s.a. learned in contrast to purported bank confirmations submitted to the n f a that sought to confirm the u.s. bank account balances as of february two thousand and ten and march two thousand and eleven there were puerto balances of two hundred seven and two hundred eighty million dollars respectively actual balances. at those times was less than ten million dollars for each one of these months now according to press reports the f.b.i. is investigating this the f.t.c. the commodities futures trading commission has filed a complaint against peregrine financial group or p.f.g. and its owner who you see there mr wasson dorf the c.r.t.c. alleges fraud by misappropriating customer funds violating customer segregation laws making false statements in financial statements does this all sound familiar

we've been reporting on a lot of these same issues same themes for months in the wake of m.f. global's collapse so we'll get more into the big picture in a moment first we want to get up to speed with what customers are dealing with christopher olsen is one he's also president and c.e.o. of treasure island points and first i really appreciate you being on the show thank you so much mr olson thanks for having me on the arm absolutely so first just bring us up to speed what is your relationship to this firm and what's happened in your personal situation well we've been trading futures through p.s.u. best for nearly twenty years and we recently began trading for x. driven two cents fundamentals with them through those fundamentals division the early twenty ten we did a lot of business with and we're primarily a physical precious metals do you are meaning that we sell physical coins and bars to private investors worldwide in order to do that we need to hedge our positions

so companies like ours typically deal if you choose contracts or forex positions in order to hedge the price well we go about acquiring resupply of the precious metals that we've sold customers ok and now that you've heard the news you've been informed as to p.s.g. best situation what what happens with with your money with the firm with your trades what's going on there all the trees have been locked down the. the money that we. all the trains have been locked down and the money that we need to operate is locked up with them so there's a good chunk of our operating capital that's been stock and it hasn't closed our business or done much more than give us a good gut shot but it's real wake up call to the fact that we can't rely on the typical instruments that a company needs to use in order to hedge and do business and that also industry in

order to do business the trust factor is gone and it's rapidly evaporating throughout the entire financial system and this isn't the first time that we've had a story like this i mean this is just nine months or so after the m.f. global collapse one of the big issues that goes through both is where were regulators do you have any sense because of your inner knowledge of this business your experience with this company of how regulators cannot know that that hundreds of millions of dollars in customer money are in the bank that the company is saying that they are not just now but going back to two thousand and ten and two thousand and eleven. this is massive regulatory failure and i cannot help but think that they've been bought off they did a spot check in the wake of the end of the scandal and u.s. futures brokers including p.s.g. were thought to be in compliance they said there's nothing to see here falls everything's fine he was only m.f. global they didn't check the bank accounts of u.s.

bank that was supposed to be holding over two hundred million dollars of clients segregated funds or is less than ten million dollars and they've had well over a year to look into this and they have mentioned the j.p. morgan chase account all they've mentioned so far as this u.s. bank account whenever we sent body yen to p.s.g. we sentence j.p. morgan don't want said anything about the account you want more and that's interesting so we have a screen shot of showing where the wire transfers go that j.p. morgan it is who the segregated accounts are where if you are appear to customer now now we spoke to the n f. they said that the onus is not on j.p. morgan to make sure that that what p.s.g. is reporting in terms of its customer accounts is accurate that the onus is not on j.p. morgan but j.p. morgan is involved in this in a different way you were talking to me earlier about how in in at least one of pierre t.'s business j.p. morgan is the prime broker so what role did they play well she had she made a big market in o.t.c.

spot battles derivatives market that involves basically four x. pairs where you can buy or sell precious metals through. against the price in u.s. dollars and so j.p. morgan was the prime broker that provided you have cheap with a liquidity to make this market currently from what i've been told p.f. she would trade from other things like torture bank u.b.s. other banks that were making you market in these derivatives but she if you morgan was the prime credit line of credit facility that provided the liquidity to p.f.c. precious metals right now our entire forex position which numbers in the six figures is locked down and is under the strict control of j.p. morgan and as we speak the precious metals market has dropped significantly since yesterday so this entire position that we have which if you morgan inspired metals has been held captive and they are presumably liquidating it now without our

control at a very low point in the market causing us further losses and it's completely out of your hands now another really interesting aspect of this that you pointed out was that p. have to be if they're when they're dealing with these trades with j.p. morgan that they don't have to post the customers martin with j.p. morgan do i have that right so so they have the what's the ok what were you what's ok tell me explain to me what you were telling me about earlier with positions when they have a certain amount of longs in a certain amount of shorts that even out that they'd maybe can keep a customer's money and they don't have to post it as margin. you know that's that's with regards to the futures contracts the derivatives are o.t.c. they're basically for the most part unregulated there's no central exchange reporting of what these positions with these banks truly are the derivatives are very scary the other side of the coin is the futures market we were active in that with p.s.g. as well i'm ok choose a non clearing firm however so they were they had to clear all of their trades

through another clearing firm in this case beijing but the thing is when they're providing that type of a service they're simply acting as a proxy to beijing so if they have a margin requirement for having the long position of say fifty thousand ounces of gold but they simultaneously have a short position of fifty thousand ounces of gold from another customer that essentially creates a net position of zero which requires that p.f. she put up a very minimal minimal margin about for that position as it's being wrecked reckoned as a net zero zero zero her for those who have a fifteen thousand law position and the fifty thousand short position they put up a full margin it's a piece of p.f. she collects that money they do not necessarily need to forward it based on the adding of the transactions to their clearing broker so that money is sitting in

these safe funds account that she is supposedly managing that the f.a.a. is supposedly overseeing better supposedly on hold for the customers they're doing whatever they want with that money we found out they've been spending it they've been losing at. yad l.a. at now one thing that i want to ask you about because you have been in contact with a former employee as someone that you have had me speak to we both spoke to me doesn't want to go on camera for obvious reasons but just to paint a little bit of a picture of what was going on with this company and terms of. korat said adèle a what what did he tell you. well he said the internally within p.s.g. it was a very incestuous relationship for example brenda kind of hers the c.f.o. she was brought on to the company you nine hundred ninety four as a staff accountant she was later promoted to c.f.o. without being a c.p.a. or having any undergraduate study her former job duties involved managing and

doing audit and reconciliation and customer segregated funds account so here staff accountant is promoted to c.f.o. of a company of this size under the regulators eyes this is gonna raise red flags russ was a door senior the owner and c.e.o. of the company builds a twenty four million dollar building in cedar falls iowa far away from any financial centers and goes in on a private jet to fly back and forth between chicago and cedar falls there's all sorts of things that we could talk about that just don't make any sense and the type of people that he surrounded himself with is in this company were a type of people to say no or to ask questions because they were all enjoying the ride you know surrounding himself with people who agree with everything he did and did not ask questions and at the same time allegedly falsifying information that

the company was posting losses while he's investing in a private jet and as you were telling me earlier hiring george w. bush to to speak it speaking again engagements opening a restaurant taking staff to go see how cuisine is done in northern italy all of this going on all of this getting by regulators for years we just have a minute but after about a day after that do you have faith then and the financial system at least and and segregated funds and their sanctity well segregated funds are the problem yet f.a.a. is supposed to be overseeing this they weren't even checking the. bank account of peat of cheap they're just going off of rust loss of nerve seniors signature he says yeah there's three hundred million in the bank trust me they don't ever call the bank they don't want to see a real statement what sense does this make they have and have a people in their offices every day going over all their advertisements and all their paperwork with a fine tooth called how could they have not known this money was not in that us big

account saved funds need to be walked out they need to be reported on a daily basis for right now this is not a requirement of these regulators and the n.s.a. has failed miserably to do its job it has failed completely to do its job if you can't do something as simple as check the bank account what good is well and even in the wake of m.f. global you would think that there would be that much more scrutiny of segregated funds which makes this all the more alarming in my view at least i appreciate you being on the show to share your story thanks so much christopher that's christopher olsen president and c.e.o. of treasure island coins now also still ahead do not go away we'll speak to another best customer this one in egypt he's not the u.s. would be a safe place to put his money plus we're experiencing deja vu after the m.f. global theft of customer money when it filed for bankruptcy last october we're not alone you will hear from the man who is helping to get customer money back for m.f.

global finance but first their closing market numbers. exist. magine assets that the devil watches show every single morning. and waiting for you to stumble. i saw a man with

a video camera so i moved over and he followed me with him but we realized there were following everyone from early in the morning. the only chance to get rid of him. is to reveal him. me devil operation on archie. stop and look at the current of it unemployment the national debt failing governments ask yourself does it really matter who wins with billions created daily you can gamble with your money or turn it into solid gold

request the gold and silver investors god. call today eight hundred two five seven gold. if you're having deja vu because less than a year ago we were talking about a lot of the same issues with another now defunct firm m.f. global you are certainly not alone earlier i interviewed a p.s.g. customer in egypt he is an egyptian he had an account with p.s.g. because he was looking to diversify and with the recent turmoil in his country he thought the us was the place to be theoretically he recounted to me earlier how back in two thousand and three he went to a presentation where the instructors talked about how the exchanges in the u.s. have been there since the eighteen hundreds and contracts have always been on earth

he looked at the f.a.a. and the c. f.t.c. claims about the due diligence they were supposedly doing he was very impressed now fast forward in those years and sees had accounts in the us he barely missed m.f. global bankruptcy by luck he had pulled his money out of m.f. global got in a fight with the broker he was caught up in the rough go bankruptcy luckily he got his money back now after this where he has had his money with p.s.g. and it is frozen he cannot get it here is his assessment. seems to think it's becoming destruction of the problem and almost the. change but. when we went in and invest in the us we invest a lot to be the safest least i mean of course to a bit of the risk of the treats you build the risk of the commodities on the future

going through it's that you go to but no longer reserve that you're going to bear the risk of that at least it's not doing the job. so should we be considering that i don't know if systemic risk that regulators are going to be doing their job because it seems we have plenty of evidence that they're not now in this customer's case he was using his account to fund his business in egypt because obviously business right now in egypt since the revolution has been tough he tells me and now he doesn't know if he's going to be able to even fund his business because the money he was using he was getting from p.s.g. he can't touch that money now he has a boutique financial investment and consultancy firm in egypt so let's step back let's talk about the bigger picture let's talk about regulation let's talk about if we have a trend here with m.f. global and p.f.g. john rowe has been fighting for customers of m.f. global fighting for them to get their money back he's co-founder of the commodity customer coalition and he's here now to help us understand how this affects investor confidence and the broader picture so first thank you so much for being on

the show today we really appreciate having you on on a day like today thank you yeah absolutely so first you said i saw you quoted in an article you're having deja vu why are you having deja vu john row over this nine months after a global. dollars. property being you know to be charitable this is appropriate why the commodities broker and us in. such a short time we've got the first instance on just the early. in the way there was with them a little so it seems like we're still pretty much the same a similar process and. speaking of that process you have been going through it with m.f. global you've been looking at all of the fine print of how that was able to happen i want to know the c.r.t.c. in january said it found no material breaches of customer fund protection requirements and a joint review of the seventy largest f c m's with the f.a.a.

so this was it was included in this. how does this happen. well there's no answer for that so you have to see it's going to have. a simple a so much time in a bank account. or it could have been produced or there are vying with the bank holding the bonds that under there that is an utter failure of regulators that is absolutely in comprehensible no system of regulation is going to we're if the regulators are incompetent so to our mind this calls for sure of the tremendous amount of work about the industry but in the regulations are insufficient. funds and the laws they're determined to deter and the regulators are inept policing with us that we have to have some of them as i'm sure a customer confidence or you're not going to have anybody will disappear in markets

no so. if this is i guess what i want to know is in your experience and your view of this latest story do you see this as regulators failing to do their jobs or do you see there being a problem with with regulations because when we spoke to the f.a.a. earlier they said that they don't have to do due diligence to find out if these bank statements are accurate they get the bank statements and they're certified by a third party accountant which we were unable to find much information about and that the n.s.a. then says ok good we've got our information is that right. well i mean that excuse doesn't really pass muster no if you receive information for doing a third party and it's verified and that's good enough if someone can hold two hundred twenty million dollars. from their earlier allegedly for years that system doesn't seem to work at all and that's going to have to be completely reboots and to have a regulator who just in january everything's done now i know that in time that they

thought that was adequate if their test in january was adequate and that they would someone have two hundred twenty million dollars we off the books and there's two hundred twenty one dollars or twenty five million dollars in there but. somehow that's good enough all this stuff works fine we just don't understand how it works that's crazy it is crazy i could agree more you know one question i have that also seems crazy to me today i sat down on my computer i opened up the financial times there's a story the f.b.i. is investigating that the c.s. heathy already has a suit alleging fraud naming the c.e.o. of this brokerage which was the owner to i think i recall this story the day after m.f. global's bankruptcy i still don't think i've seen this story not in the same way. no you haven't and of course that begs the question what is different in the case of them as well and that as you know john or design is very politically connected

and all things being equal you don't see the same paratus of you from the department just in this case the f.b.i. was in there investigating very quickly after the medical but all you heard of very complicated and money vaporized and there was there were. after especially in light of the trustees proceedings recent or very clearly it was and we still haven't seen the charges and if you look at the seminal case the government has a tremendous amount political cover to say you know this takes a long time took us five years to file charges and sent up it so that they'll give them tons and tons of time for people to go ahead and forget about them up a little and not worry about junk or that but in the case of rust lozenge or well ok this is this is much more straightforward this is maybe a barnum a situation we're going to we're going to burn them down but again the one thing that is not equal between the two cases is the political connections of the c.e.o. i'm a little right and you mentioned bernie madoff is this a very made up case or not because with bernie madoff

a regulated firm in the same way that p.s.e. back what you're buying the. firm i went through a cyclical nation with some of those customers that actually they weren't regulated by the f.a.a. but they were regulated but. ok so yes i mean again and we said this many times when i had said to us many times you can stuff jesse james around it with the. proper group going ahead and holding you up which you can do is make sure that there's some sort of mechanism to make sure that customers have some sort of protection in the event that all of these things that everyone tells us over and over and over again are in place to protect to protect us bail because clearly twice the nine month right absolutely now i know that you probably talk to a lot of m.f. global customers i'm assuming then that you've heard what i've heard over the last nine months reporting on that which a lot of them they don't. longer have faith in the safeties that they're supposedly guaranteed by regulators by the u.s. financial system in the wake of p.f.g.

best i'm sure you're getting a lot of calls today talking to a lot of people what are you hearing today are people saying forget it i'm done i'm out. well there's a special class of customers that we heard by this from that day at the g. they got caught up in m m g they ordered to another trading firm and then ended up . so they're actually caught in both bankruptcy and oddly what we found alive ironically is that actually some of their money shielded malfeasance but the fact that extract m.f. global so is zero interest rate environment it appears the safest place for your money is the bankruptcy court a sad sad commentary on the financial system. but we're hearing from customers those customers are beleaguered and i'm not sure that many of them are going to have to pay him you know they have the option not to retard the futures markets will obviously they're kinder's that have to participate if you just market with

the exception of the fact that we may seem many more people. are trading and direct already trading which will increase our party credit risk but the same time if all these guys are stealing your money what's going on. but a lot of customers who are resell customers who are just investors they're going to look for other investments where they're going to go with first entry and they're going to look for other ways to get exposure to these commodities which doesn't necessarily get them out because like i was a money back e.d.s. are actually just logical so they're also. saying that you have to at the counter and it seems the risk you have your claim with what if they do something wrong and your claim doesn't mean i think it's a piece of paper you don't have what you've actually bought i really appreciate you being on the show that's all we have time for today thanks so much for your expertise that was john breaux co-founder of the commodity customer coalition and that is all we have time for thank you so much for watching make sure to come back tomorrow and in the meantime you know you can follow me on twitter at more and mr

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