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Bankruptcy Court Forex Judgments Upheld On Appeal

   On August 15, 2016, United States District Judge John J. Tharp, Jr. entered an order affirming two prior rulings by the Bankruptcy Court related to the treatment of claims by customers who held accounts with PFG for retail foreign exchange (“Forex”) and over-the-counter spot metals (“Metals”) trading.

   In Secure Leverage Group Inc., et al. v. Bodenstein (14 CV 5024), a group of former Forex and Metals customers sought the return of funds held by PFG at the time of its bankruptcy on the grounds that Forex and Metals contracts were “commodity contracts” within the meaning of the Bankruptcy Code. Therefore, the plaintiffs argued, their claims were entitled to the same priority afforded to futures customers. The Secure Leverage claimants also asserted that PFG held the funds they deposited for Forex and Metals trading in trust, such that those funds are not part of the bankruptcy estate. The Bankruptcy Court rejected both theories and, on appeal, Judge Tharp agreed, endorsing the Bankruptcy Court’s rationale and affirming its judgment in favor of the Trustee.

   In Miller, et al. v. Bodenstein, (15 CV 4260), a second group of Forex and Metals claimants, represented by the same attorneys as the Secure Leverage plaintiffs, filed a class action lawsuit on behalf of all of PFG’s former Forex and Metals customers, in which they asserted new legal theories in support of their claims for the return of funds deposited for Forex and Metals trading. Because the Miller class action lawsuit was filed more than two years after the claims bar date, the Bankruptcy Court dismissed the lawsuit as untimely. Again, Judge Tharp agreed and affirmed the Bankruptcy Court’s entry of judgment in favor of the Trustee.

   The Secure Leverage and Miller claimants have until September 14, 2016 to appeal Judge Tharp’s ruling to the Court of Appeals for the Seventh Circuit.




On February 3, 2016, the Trustee filed the Trustee’s Motion for Entry of an Order Authorizing Additional Interim Distributions on Allowed 4d Customer Claims (the “Motion”).[1]  In the Motion, the Trustee requested authority from the Bankruptcy Court to make up to a sixty (60%) interim distribution of segregated cash to the holders of Allowed 4d Customer Claims (the “Proposed Distribution”).

With respect to holders of Allowed 4d Customer Claims that received all Prior Distributions, the proposed incremental distribution will be 11%.  The Trustee will continue to make 100% distributions to holders of Allowed 30.7 Customer Claims as the remaining unresolved 30.7 Customer claims become Allowed Futures Claims.  Holders of Allowed Futures Claims that did not receive the full amount of their Prior Distributions will receive their pro rata share of the undistributed portion of all Prior Distributions.

The Trustee also requested authority from the Bankruptcy Court to set 11:59 p.m. (CST) on February 3, 2016 as the “Record Date” for the Proposed Distribution.  As of the Record Date, the claims register shall be closed for the purposes of the Proposed Distribution and the Trustee shall have no obligation to recognize any transfer of any claims occurring after the Record Date.  The Proposed Distribution checks will be mailed to the customer at the address contained in the proof of claim as of the Record Date.

The Motion is scheduled for hearing on February 11, at 10:00 a.m. (CST) in Courtroom No. 742, United States Courthouse, 219 South Dearborn Street, Chicago, Illinois, before the Honorable Judge Carol A. Doyle, Bankruptcy Judge, or such other Judge who may be sitting in her place and stead.  Such hearing may be continued from time to time without further notice other than by announcement in open Court.  A copy of the Motion and the proposed order is available here.

[1] Capitalized terms not defined herein shall have the meanings ascribed to them in the Motion.



On October 13, 2015, United States District Court Judge Sara L. Ellis entered a series of Orders, which resolved the pending customer class action brought against U.S. Bank National Association (“U.S. Bank”) Civil Action No. 12-cv-5546.  The Orders which were entered are as follows:

i. Final Judgment and Order of Dismissal with Prejudice;

ii. Order Approving Plan of Allocation;

iii. Order Awarding Attorneys’ Fees and Expenses; and

iv. Order Awarding Service Awards

As a result of the settlement, U.S. Bank will be making a payment of $44.5 million dollars to resolve all claims.  Of that amount, the court approved legal fees for the class lawyers in the amount of $13,795,000 and expenses of $437,440.  The court also approved services awards to the named plaintiffs in the class action totaling $45,000.

Under the Plan of Allocation:

  • For “New Claimants” (Class members who do not have allowed claims in the bankruptcy action), each “shall receiver a share of the Net Settlement Fund that is determined by multiplying the amount of such New Claimant’s timely claim as approved in the Customer Class Action by a payment ratio computed as: the Net Settlement Fund divided by $215,000,000.00.”  The amount to be distributed to New Claimants is capped at 50% of the Net Settlement Fund.
  • For Class members with allowed claims in the bankruptcy case: “After the determination of the aggregate amount to be disbursed to the New Claimants, the balance of the Net Settlement Fund shall be transferred to the Trustee for distribution to Settlement Class Members who hold Allowed Claims in the Bankruptcy Case.”

The Trustee estimates the balance of the “Net Settlement Fund” will be approximately $30,000,000.  Upon receipt of the balance of the “Net Settlement Fund” the Trustee will file a motion with the bankruptcy court to authorize a further distribution to 4d claimants with Allowed Claims.  The Trustee anticipates the distribution will be made in the first quarter of 2016.

The hearing was held on February 11, at 10:00 a.m. (CST).  A copy of the order is available here.

Main DebtorCase No. 12-27488 Peregrine Financial Group, Inc. dba PFG Best
United States Bankruptcy CourtNorthern District of Illinois
JudgeHon. Carol A. Doyle
Petition Filing DateJuly 10, 2012
Claims Bar DateDecember 14, 2012
Government Bar DateJanuary 11, 2013
Amended Bar DateMarch 15, 2013
Record Date for Fifth DistributionFebruary 3, 2016
Hearing DateJanuary 26, 2017
Chapter 7 TrusteeIra Bodenstein
Shaw Fishman Glantz & Towbin LLC
321 N Clark Street Suite 800
Chicago, IL 60654
Phone: (312) 541-0151
Attorneys for TrusteeShaw Fishman Glantz & Towbin LLC
321 N. Clark St., Suite 800
Chicago, IL 60654
Phone: (312) 541-0151
(Website)    (Contacts)
Receiver for Russell R. Wasendorf, Sr. appointed by the United States District Court for the Northern District of IllinoisMichael M. Eidelman
Vedder Price
222 North LaSalle Street
Chicago, IL 60601
Phone: (312) 609-7500
United States TrusteeU.S. Trustee
Office of the US Trustee
219 S Dearborn St, Room 873
Chicago, IL 60604
Phone: (312) 886-5785

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