That helped convince Phil Flynn, at the time a broker with Peregrine, to leave the firm after five years.
"For me, that was a big red flag to start looking for another firm," said Flynn, who now works with Price Futures Group in Chicago. "My only regret is that I didn't act faster."
Flynn said there were other strange things about working for Peregrine: He learned about the company's problems in newspapers, not directly from management.
And he said Wasendorf Sr. gave an awkward, rambling speech at the company's most recent Christmas party about his early business career and what it takes to become a success.
"It was kind of a downbeat thing for a Christmas party, kind of out of place and weird," he said.
Flynn said some firm employees referred to Wasendorf's inner circle as "Wasendorfians." He said the chairman was often surrounded by underlings who treated him "like he was the rock star of the firm, with great deference."
Wasendorf built an $18 million headquarters for the company that included a daycare center, a Montessori School for employees' kids and free breakfast and lunch, Flynn said.
"It was almost unbelievable," he said of the facility's opulence.
After the failures of MF Global and Peregrine, Peregrine customer Davey said traders are beginning to lose faith in regulators' ability to safeguard their money.
MF Global filed for bankruptcy protection in October after it was crippled by disastrous bets on European debt. A bankruptcy trustee is still trying to recover $1.6 billion in money missing from MF Global's client accounts.
"People's confidence was shaken last October," Davey said. "Now it's really put a dagger into a lot of people's hearts."
He said he has talked to people who might stop trading because they don't know whom they can trust with their money.
"The effect is going to be on some of these smaller retail accounts that provide a fair amount of volume and money to the markets," he said. "They might dry up and say 'I'm not even going to try playing this game.'"
Peregrine had assets of $500 million to $1 billion and liabilities of $100 million to $500 million, according to its bankruptcy filing. It had between 10,000 and 25,000 creditors.
Flynn said he was amazed that regulators failed to catch the problem earlier, given the scrutiny of firms like Peregrine after MF Global's downfall.
"It's mind-boggling to me," he said. "They're talking about new regulations, but that doesn't get to the crux of the problem. The crux of the problem is, where's the money? You say you have X amount of dollars. Where is it?"
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Suhr reported from St. Louis. Associated Press writers Pete Yost and Marcy Gordon in Washington contributed to this report.
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Daniel Wagner can be reached at www.twitter.com/wagnerreports .
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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