If there is an event that should cost Gary Gensler his job as head regulator at the CFTC, it is this. According to a just released Reuters report, the head of MFG(lobal) part 2, PFG, whose story we broke yesterday, Russell Wasendorf Sr. "intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation." Once Wasendorf realized he was caught, and knew the implications of his actions would be exposed for the whole world to see, he tried to commit suicide, and failed. "Wasendorf, 64, is reported to be in a coma after a suicide attempt Monday morning, according to a complaint filed by the Commodity Futures Trading Commission on Tuesday that accuses Wasendorf and Peregrine of fraud." And while crime happens all the time, what is truly stunning is that as we reported previously, the CFTC gave the firm a clean bill of health in its January inspection of Peregrine Financial Group. That's 6 months ago. The CFTC, as a reminder, was it regulator. The entity whose sole charge is to make sure that firms at least have real, not rehypothecated, cash in their segregated client bank accounts. PFG never did for the past two years. And somehow the CFTC missed this. MF Global was a warning shot, and the CFTC missed it entirely. And not only that but 2 months later ir pronounced PFG clean. For this Gensler has to be fired immediately, and with prejudice.

More from Reuters:

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution. Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week. Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank. The post office box was neither in Wasendorf's name nor registered to the bank, the second person said. Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said. Calls to spokespeople for PFGBest and NFA were not returned. A woman who answered the phone at the home of Wasendorf declined to comment.

If anyone deserves some credit here, it is the NFA:

The scheme apparently began to unravel after the NFA began to press Wasendorf, who was an early advocate of electronic trading, to allow the regulator to confirm balances electronically and directly with the bank, rather than in a hard copy via mail, the person said. NFA "started getting suspicious. He was resisting this new way of confirming the balance," the source said. Wasendorf only recently signed the authorization, a decision that would quickly have led regulators to uncover the discrepancy, the person said. PFGBest's total segregated funds requirement was around $400 million, meaning more than half is missing.

Finally the spin: PFG is not MFG, it is Madoff.

While news that a second broker in less than a year appears to have misappropriated customer funds drew immediate comparisons to the MF Global failure in October, the source said the prolonged nature of the apparent deceit drew a more fitting parallel to the Ponzi scheme run by Bernard Madoff, though the size of the funds missing from PFGBest is tiny by comparison.

Well thank god for that: the farmers whose money is now forever gone can sleep much better knowing their cash was not Corzined, it was merely Made-off.

Of course, the real problem is that since there was only $5 million in the "client fund", there never likely was more than $5 million in real cash terms to begin with.

And this is what the CFTC signed off on.

Cur Congressional banana hearings, witch trials, and more fingerpointing which will result in more of the same: a former Goldmanite in charge of the CFTC, and virtually no hope that anything in these broken capital markets will ever be fixed until the big reset finally sweeps all this toxic garbage away.