FORTUNE -- Trustees are still scrambling to find the billions at MF Global and the millions at Peregrine that have gone missing from customer accounts.
In June, a report from the MF Global (MFGLQ) trustee stated that there are "claims for breach of fiduciary duty and negligence … that may be asserted against [MF Global CEO Jon Corzine]," though it looks like the prospect of criminal charges against Corzine may be dimming. But the wheels of justice are moving much more quickly for Peregrine CEO Russell Wasendorf. He will be arraigned on Friday resulting from an indictment by the Commodities Future Trading Commission earlier this week for allegedly falsifying records.
A confession purportedly written by Wasendorf explained how he had used forgeries of bank statements and a post office box he opened in 2006 to thwart regulators' and auditors' paper-based confirmations of customer accounts. As of the end of the year, the accounts held $215 million less than the forged bank statement showed.
So what pushed Wasendorf over the edge in 2012?
In the weeks leading up to his attempted suicide, the National Futures Association began to forcefully urge Wasendorf to allow electronic confirmations of Peregrine's bank holdings, according to Brian Fox, founder of Confirmation.com, a firm that appears to be practically the only game in town for this type of service. "When he finally agreed to our electronic confirmation process," he knew the gig was up, Fox says.
In contrast to a paper-based process, electronic confirmations use additional security mechanisms to ensure that whoever confirms an account balance during an audit has the appropriate credentials to do so. According to Fordham accounting professor Barbara Porco, who has worked on a research project with Confirmation.com, "A fraudster may be able to create false verification; however, the electronic process makes it more challenging." More
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