Long before there was an MF Global debacle or Peregrine Financial Group (PFG) fraud (or at least before it was revealed) there was Sentinel Management Group. Sentinel was unique in that it was a futures commission merchant (FCM) in name only.Its core business was custodial cash management and in August of 2007 it declared bankruptcy after first freezing customer redemptions before it was revealed/alleged that they misappropriated customer funds and could not meet their obligation.
Sentinel was (and is) a messy case as it highlighted the conflicts of a bifurcated regulatory environment. The Securities and Exchange Commission charged Sentinel with fraud and wanted to freeze customer assets, assets customers placed with Sentinel specifically so they could access them at a moment’s notice. The Commodity Futures Trading Commission (CFTC) pointed this out to the bankruptcy judge and luckily, for FCM clients, prevailed.
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