Lawmakers demand accountability after customer cash vanishes from another bankrupt firm

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Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) said her staff is digging into the issue, and is considering whether new laws are needed to protect customers.

"It is absolutely imperative that there is accountability in the futures markets so customers can feel safe knowing their money is protected,” she said. “We are working closely with regulators to find out what happened. ... Congress also has a responsibility to assess current customer protections and strengthen them where needed to put a stop to executives misusing customer funds in the future.”

Meanwhile, the Senate Banking Committee has also been briefed by regulators on the situation and is monitoring it.

Sen. Richard Shelby (R-Ala.), the ranking Republican on the panel, directed his ire towards regulators for allowing another firm to apparently abuse protected funds.

"In the wake of MF Global, this latest failure raises serious questions about our current regulators and whether they are capable of doing their jobs," he said in a statement.

On Tuesday, the CFTC filed suit in U.S. District Court against PFG and its chief executive, Russell Wasendorf. The lawsuit claims that the firm committed fraud by misrepresenting its holdings in customer accounts. When the firm reported holding more than $220 million in customer funds during a July audit, it actually had just $5.1 million on hand, according to the lawsuit.

The CFTC alleges that PFG misled regulators on the dire state of its finances and says the whereabouts of the missing funds is "unknown." The firm declared bankruptcy Wednesday.

The call for oversight comes just six months after lawmakers went through a similar examination after the collapse of MF Global. That high-profile bankruptcy led to multiple hearings in both the House and Senate, as irate members grilled former executives for the firm about how $1.6 billion in customer funds could have gone missing. 

MF Global had been run by Jon Corzine, a former Democratic senator and governor for New Jersey. Corzine and other MF Global executives repeatedly maintained that they did not know what happened to the customer funds in the final hectic days trying to keep the firm afloat, and a trustee is currently working to try and locate and restore whatever is possible of the $1.6 billion in funds.

In PFG's case, the CFTC alleges that the firm had failed to keep customer funds segregated as mandated by law for more than two years, going back to February 2010. And while MF Global's collapse was a major blow to the once-lofty reputation of Corzine, the situation is even more dire at PFG, where Wasendorf was found by employees in the firm's parking lot after an apparent suicide attempt. In its suit, the CFTC said he is now in a coma.

One need look no further than the schedule for Stabenow's panel to realize the brief period between the two failures. What was supposed to be an Aug. 1 hearing to further discuss the MF Global bankruptcy and how to ensure the futures markets remain reliable now will surely focus on the meltdown at PFG as well.

The committee also had planned a July hearing with regulators and financial market experts to discuss the Dodd-Frank financial reform law two years after its passage. Among those slated to testify is Gary Gensler, head of the CFTC, who now will likely have to field questions on the latest event.

This post updated at 3:03 p.m.