In the
United States Court of Appeals
For the Seventh Circuit
No. 16‐3424
IN RE:
PEREGRINE FINANCIAL GROUP, INC.,
Debtor,
SECURE LEVERAGE GROUP, INC., et al.,
Appellants,
v.
IRA BODENSTEIN,
Appellee,
and
COMMODITY FUTURES TRADING COMMISSION,
Intervenor‐Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:14‐cv‐05024 — John J. Tharp, Jr., Judge.
2 Nos. 16‐3424, 16‐3425
No. 16‐3425
IN RE:
PEREGRINE FINANCIAL GROUP, INC.,
Debtor,
ROBERT MILLER, et al.,
Appellants,
v.
IRA BODENSTEIN, Trustee of Estate of
Peregrine Financial Group, Inc., Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:15‐cv‐04260 — John J. Tharp, Jr., Judge.
ARGUED MAY 30, 2017 — DECIDED AUGUST 7, 2017
AMENDED AUGUST 8, 2017
Before WOOD, Chief Judge, and RIPPLE and ROVNER, Circuit
Judges.
ROVNER, Circuit Judge. This is a consolidated appeal from
judgments entered by the bankruptcy court and affirmed by
the district court, in favor of the defendant Ira Bodenstein, the
Chapter 7 trustee of the estate of Peregrine Financial Group
(“Peregrine”). Peregrine was a registered futures commissions
merchant (FCM) and a registered forex dealer member of the
Nos. 16‐3424, 16‐3425 3
National Futures Association. In addition to futures, Peregrine
dealt in retail foreign currency transactions (“retail forex”) and
spot metal transactions. The plaintiffs are investors who
executed retail forex and spot metal contracts with Peregrine.
This consolidated appeal arose out of a series of events
which culminated in Peregrine’s bankruptcy filing. In July
2012, the Commodity Futures Trading Commission notified
Russell L. Wasendorf, Peregrine’s Chief Executive Officer and
the Chairman of the Board, that Peregrine’s accounts were
going to be electronically monitored. Wasendorf attempted
suicide the next day, after penning a statement admitting to
embezzling millions of dollars over a 20‐year period. He was
subsequently arrested, and in September 2012, pled guilty to
four criminal charges, including admitting that he embezzled
and misappropriated nearly $200 million from Peregrine’s
segregated customer futures accounts.
As a result of that loss, Peregrine filed for bankruptcy, and
Bodenstein was appointed as trustee. Subchapter IV of
Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 761–767
governs the bankruptcy of a futures commissions merchant
such as Peregrine, and 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, 17 C.F.R. § 190.08(a)(1)(i)(A),
which in turn is defined in § 761(4) of the Bankruptcy Code.
Bodenstein excluded the plaintiffs, Secured Leverage Group,
et al., from that priority distribution based on his determina‐
tion that forex and spot metal transactions did not constitute
“commodity contracts” as so defined. The Secured Leverage
plaintiffs then filed an adversary complaint against Bodenstein,
4 Nos. 16‐3424, 16‐3425
challenging that decision. After that adversary proceeding was
terminated, another group of customers including Robert
Miller and others (the “Miller plaintiffs), filed a class action
adversary proceeding against Bodenstein, alleging fraud,
breach of fiduciary duty, unjust enrichment, and conversion,
and seeking the imposition of a constructive trust. As that
claim was filed two years after the bar date for proofs of claim,
and involved claims based on facts unrelated to the timely filed
contract‐based claims, the bankruptcy court dismissed the
action as untimely.
On appeal, the plaintiffs in this consolidated action chal‐
lenge the decisions of the bankruptcy court and the district
court. The Secured Leverage plaintiffs assert that: their funds
were held in a resulting trust and therefore were not included
in the bankruptcy estate; the forex and spot metal contracts
constituted commodity contracts under the similar contracts
clause, 11 U.S.C. § 761(4)(F)(i); and the bankruptcy court erred
in precluding the expert testimony of Martin Doyle. The Miller
plaintiffs allege: that the courts erred in holding that the Miller
plaintiffs’ claim was untimely and did not constitute an
amended claim; and that a constructive trust is a proper
remedy.
In a thorough and well‐reasoned opinion, the district court
properly resolved all of those challenges, and nothing that is
argued in the briefs to this court leads us to disagree with the
district court’s analysis. Because we agree with the reasoning
and conclusions of the district court as to all of the issues raised
on appeal, we hereby adopt the district court’s opinion set
forth at Secure Leverage Grp., Inc. v. Bodenstein, 558 B.R. 226, 231
(N.D. Ill. 2016) as our own in this appeal.
Nos. 16‐3424, 16‐3425 5
The decision of the district court as to both appeals is
AFFIRMED.