Miller v. Bodenstein, No. 16-3425 (7th Cir. 2017)Annotate this Case
Peregrine was a registered futures commissions merchant, a registered forex dealer member of the National Futures Association, and dealt in retail foreign currency (retailforex) and spot metal transactions. The Commodity Futures Trading Commission notified Wasendorf, Peregrine’s CEO and the Chairman of the Board, that Peregrine’s accounts were going to be electronically monitored. Wasendorf attempted suicide, after penning a statement admitting to 20 years of embezzlement. He pled guilty to misappropriating nearly $200 million from Peregrine’s segregated customer futures accounts. Peregrine filed for bankruptcy. Bodenstein was appointed as trustee. The bankruptcy of a futures commissions merchant is governed by 11 U.S.C. 761-767, which provides for the distribution of “customer property” in priority to all other claims. “Customer property” is defined as including funds received in connection with a commodity contract, which is defined in section 761(4). Bodenstein excluded one group of plaintiffs from that priority distribution, concluding that forex and spot metal transactions did not constitute “commodity contracts.” After the plaintiffs' adversary proceeding was terminated, another group of customers filed a class action adversary proceeding, alleging fraud, breach of fiduciary duty, unjust enrichment, and conversion, and seeking the imposition of a constructive trust. The bankruptcy court dismissed the action as untimely. In a consolidated appeal, the Seventh Circuit affirmed the bankruptcy court and the district court, rejecting the claims.
The court issued a subsequent related opinion or order on August 8, 2017.