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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

In re: PEREGRINE FINANCIAL GROUP, INC., ) ) ) ) ) ) ) ) ) Chapter 7 Case No. 12-27488 Honorable Judge Carol A. Doyle Hearing Date: July 13, 2012 Hearing Time: 10:00 a.m.

Debtor.

NOTICE OF EMERGENCY MOTION PLEASE TAKE NOTICE that on July 13, 2012 at 10:00 a.m., the undersigned shall appear before the Honorable Carol A. Doyle, in Courtroom 742, 219 S. Dearborn Street, Chicago, Illinois, or before any other Judge sitting in her stead, and then and there present the TRUSTEES EMERGENCY MOTION FOR AUTHORITY TO OPERATE THE BUSINESS OF THE DEBTOR AND FOR RELATED RELIEF at which time you may appear if you see fit and a copy of which is attached and herewith served upon you.

Dated: July 12, 2012

Robert M. Fishman (#3124316) Salvatore Barbatano (#0109681) Kimberly Bacher (#6285677) Shaw Gussis Fishman Glantz Wolfson & Towbin LLC 321 North Clark Street Suite 800 Chicago, Il 60654 Phone: (312) 541-0151 Fax: (312) 980-3888 Proposed Counsel to the Trustee

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CERTIFICATE OF SERVICE Kimberly Bacher certifies that she caused to be served a true copy of the above and foregoing NOTICE OF EMERGENCY MOTION and TRUSTEES EMERGENCY MOTION FOR AUTHORITY TO OPERATE THE BUSINESS OF THE DEBTOR AND FOR RELATED RELIEF upon the attached ECF Electronic Mail Notice List and Service List in the manner so indicated on this 12th day of July, 2012. /s/ Kimberly Bacher Mailing Information for Case 12-27488 Electronic Mail Notice List The following is the list of parties who are currently on the list to receive email notice/service for this case.

Ira Bodenstein iratrustee@shawgussis.com, IL29@ecfcbis.com;sdelamora@shawgussis.com David E Cohen davidecohen@lawcohen.com jmuchoney@pfgbest.com

Jennifer M. Muchoney

Via Electronic Mail Michael M. Eidelman Vedder Price 222 North LaSalle St. Chicago, IL 60601 meidelman@vedderprice.com William P. Janulis U.S. Commodity Futures Trading Commission 525 West Monroe Street Suite 1100 Chicago, IL 60601 wjanulis@cftc.gov Jon J Kramer U.S. Commodity Futures Trading Commission 525 W. Monroe Street Chicago, IL 60661 312 596 0563 jkramer@cftc.gov

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Rosemary C. Hollinger U.S. Commodity Futures Trading Commission 525 West Monroe Street Suite 1100 Chicago, IL 60601 Email: rhollinger@cftc.gov Gretchen Silver Office of the United States Trustee 219 S. Dearborn Street Room 873 Chicago, IL 60604 Gretchen.Silver@usdoj.gov

Constantine.Harvalis@usdoj.gov Roman.L.Sukley@usdoj.gov
Scott R. Williamson Deputy Regional Counsel CFTC Division of Enforcement 525 W Monroe Street, Suite 1100 Chicago, IL 60661 swilliamson@cftc.gov Robert Wasserman Commodity Futures Trading Commission 1155 21st Street, NW Washington, DC 20581 rwasserman@cftc.gov Joseph M. Russell JP Morgan Chase Bank NA 10 S. Dearborn Street Chicago, IL 60603 Joe.russell@jpmchase.com

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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

In re: PEREGRINE FINANCIAL GROUP, INC., ) ) ) ) ) ) ) ) ) Chapter 7 Case No. 12-27488 Honorable Judge Carol A. Doyle Hearing Date: July 13, 2012 Hearing Time: 10:00 a.m.

Debtor.

TRUSTEES EMERGENCY MOTION FOR AUTHORITY TO OPERATE THE BUSINESS OF THE DEBTOR AND FOR RELATED RELIEF Pursuant to 11 U.S.C. 721 and 507(a)(4), Ira Bodenstein, not personally, but as chapter 7 trustee (the Trustee) for the estate of Peregrine Financial Group, Inc. d/b/a PFG Best ( the Debtor), respectfully requests that this Court enter an order (i) authorizing the Trustee to operate the business of the Debtor on a limited basis, (ii) authorizing the Trustee to pay certain employee obligations including payroll-related withholdings incurred prepetition and postpetition, (iii) authorizing the Trustee to continue employee benefit plans on a postpetition basis, and (iv) directing JPMorgan Chase & Co. (Chase) to honor payroll checks funded from the Debtors bank accounts (the Motion). In support of the Motion, the Trustee respectfully states as follows: BACKGROUND 1. On July 10, 2012 (the Petition Date), the Debtor filed a voluntary petition for

relief under chapter 7 of the Bankruptcy Code, 11 U.S.C. 101, et. seq. Ira Bodenstein is the duly appointed chapter 7 trustee of the Debtors estate. 2. This Court has jurisdiction to hear this matter and enter a final order granting the

relief requested herein pursuant to 28 U.S.C. 157 and 1334 and Internal Operating Procedure

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15(a) of the United States District Court for the Northern District of Illinois. Venue is proper in this District pursuant to 28 U.S.C. 1408 and 1409. 3. Prior to the Petition Date, the United States Commodity Futures Trading

Commission (CFTC) filed a lawsuit in the United States District Court for the Northern District of Illinois (District Court) alleging that the Debtor and its founder, Russell Wasendorf Sr., committed fraud, customer-funds violations and made false statements (the Lawsuit). In connection with the Lawsuit, on July 10, 2012, the District Court entered an Order Appointing a Temporary Receiver. Shortly thereafter, the Debtor commenced the above-captioned case. 4. The Debtors headquarters are located in Cedar Falls, Iowa. The Debtor also

operates out of an office in Chicago, Illinois. 5. The Debtors bankruptcy petition reflects that its assets total approximately

$500,000,001 to $1 billion and that its liabilities total approximately $100,000,001 to $500 million. RELIEF REQUESTED 6. The Trustee seeks authority pursuant to 11 U.S.C. 721 and 507(a)(4) to operate

the business of the Debtor on a limited basis to conduct the Business Operations (defined below) and to pay the Employee Obligations (defined below). A. 7. Business Operations. In order to properly and orderly liquidate the assets of the Debtor, the Trustee

requests authority to operate the business of the Debtor to, among other things, perform the following business operations (collectively, the Business Operations): i. ii. iii. Accounting functions; Regulatory compliance; Balancing and processing;

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iv. v.

Responsibilities and obligations related to human resources; Information technology; and

vi. Retaining the services of appropriate professionals and/or other service providers as necessary to properly investigate, marshal and liquidate the assets of the Debtor (including potential causes of action). 8. The Trustee does not intend to solicit new customers or new orders, market the

Debtors services to the public or execute any transactions except as pursuant to applicable bankruptcy and non-bankruptcy law. 9. The Trustee requests authority to perform the Business Operations so that he can

effectively facilitate the liquidation of the Debtors assets. Given the size and magnitude of the Debtors business, the Trustee believes that the request is necessary under the circumstances. B. 10. Employee Obligations. Wages. Prior to the Petition Date, the Debtor employed 241 employees (the

Employees). The Debtor paid the majority of the Employees semi-monthly. The Debtors next payroll date for the Employees is July 13, 2012. Payroll on July 13, 2012 includes the

Debtors obligations to the Employees for the period from July 1, 2012 to July 13, 2012. The Debtors payroll is processed through a third party payroll service, Paylocity. 11. Through consultation with the Debtors management, the Trustee has identified

fifty-seven (57) of the Employees that he will need to retain to assist him in liquidating the assets of the Debtor (the Retained Employees). 12. The Trustee requires the assistance of the Retained Employees in order to

maximize assets for the Debtors creditors. Accordingly, the Trustee seeks to pay the Retained Employees their wages and benefits incurred prior to the Petition Date, which are owing on July 13, 2012 (the Prepetition Wages). A listing of all Prepetition Wages that the Trustee seeks to

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pay by this Motion is attached hereto as Exhibit A. The Prepetition Wages for the period from July 1, 2012 to July 13, 2012 total $218,112.29. 13. Additionally, the Trustee requests authority to continue to pay the Retained

Employees the wages owed for services rendered to the Debtors estate after the Petition Date (the Postpetition Wages and together with the Prepetition Wages, the Wages). 14. The Trustee has the ability to pay the Wages through the Debtors unencumbered

funds located in one of its bank accounts with Chase (the Chase Account). The Chase Account is not subject to any security interests known to the Trustee. 15. If the Retained Employees are not paid the Wages, most of the Retained

Employees will suffer hardship. Further, if the Retained Employees are not paid and they leave, valuable assets of the Debtors estate will be compromised. 16. Employee Benefits. In the ordinary course of business, the Debtor established

various employee benefit plans and other policies. By this Motion, the Trustee requests authority to continue these benefit programs (collectively, the Employee Benefits) and to pay certain prepetition obligations with respect to such programs solely for the Retained Employees. The Employee Benefits include the following: a. Vacation benefits. After six months of eligible service, an employee is entitled to five vacation days; after one year of service, an employee is entitled to ten vacation days; and after two or more years, an employee is entitled to fifteen vacation days each year. As of the Petition Date, certain Retained Employees had accrued unused vacation days. The Trustee requests that all Retained Employees be authorized to use such accrued vacation days as authorized by the Trustee while the Trustee operates the Debtors business. The Trustee does not propose to cash out any unused vacation time and he is not seeking authority to pay the same. Insurance. The Debtor provided insurance coverage and other benefit plans to its Retained Employees, which included dental, vision, health, disability and life insurance. The Trustee requests authority to continue the insurance obligations for the Retained Employees for the period prior to the Petition Date and while the Trustee operates the Debtors business. 4
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b.

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c.

401(k) Obligations. The Debtor sponsored a 401(k) retirement savings plan that is administered through a third-party. The Debtor provided its Retained Employees with a matching contribution (Contribution Program). The Trustee does not seek authority to continue the Contribution Program, but seeks authority to permit the Retained Employees to continue making contributions to their 401(k) plans. Flexible Spending Accounts. The Debtor provided its Retained Employees with a flexible spending account plan (Flex Accounts), pursuant to which some Retained Employees maintain accounts for healthcare and dependent care. Under the Flex Accounts, Retained Employees have amounts withheld from their paychecks and those amounts subsequently can be used to reimburse Retained Employees for their healthcare and dependent care expenses. The Trustee seeks approval of this Court to continue the Flex Accounts with respect to the Retained Employees.

d.

17.

In sum, the Trustee seeks authority to pay the Employee Benefits (as set forth

herein) incurred prior to the Petition Date and to continue honoring such obligations that arise postpetition for the Retained Employees while the Trustee operates the Debtors business. C. 18. Payroll-Related Withholding Taxes and Other Withholding The Trustee also seeks confirmation that he is permitted to pay all local, state and

federal withholding and other payroll-related taxes and other withholdings relating to the Wages, including, but not limited to, Social Security taxes, Medicare taxes, retirement contributions, health care payments and garnishments. 19. Finally, the Trustee seeks an order directing all banks to honor all of the Trustees

checks or wire transfers with respect to payments authorized by this Motion. 20. Nothing contained in this Motion shall constitute a request for authority to assume

any agreements, policies or procedures relating to any executory contracts or agreements, including, but not limited to, any benefit plans, employment agreements, collective bargaining agreements or severance agreements to which the Debtor is a party.

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21.

If the Trustees request is authorized, the payment of the Wages and the

Employee Benefits to each Retained Employee will not exceed the maximum priority accorded to such claims under 507(a)(4). 22. Under the Bankruptcy Code, the Court may, in its discretion, authorize a chapter 7

trustee to continue to operate a debtors business if such action is in the best interest of the estate and consistent with the orderly liquidation of the estate." 11 U.S.C. 721. Generally, courts approve of continued operation to maximize receipts when the business is sold." In re Hessinger Resources, LTD., 67 B.R. 378, 383 (C.D. Ill. 1986). That is exactly the situation we are faced with here. The Trustee believes that the continued operation of the Debtors business is both necessary to maintain the value of the assets of the Debtors estate and to allow him to maximize the recovery from the liquidation of the Debtors business. EMERGENCY DESIGNATION 23. As a result of the Trustees immediate and ongoing need to perform the Business

Operations and to pay the Employee Obligations, any delay in hearing this Motion will cause serious and irreparable harm to the Debtors estate and the value of its assets. Therefore, the Trustees request for an emergency hearing with respect to the relief in this Motion is necessary and appropriate under the circumstances.

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WHEREFORE, the Trustee respectfully requests that this court enter an order, in a form attached hereto, pursuant to 11 U.S.C. 721, authorizing the Trustee to operate the Debtors business to perform the Business Operations, in the Trustees business judgment, to preserve value for the Debtors estate and to pay the Employee Obligations, and for such other, further and different relief as this court deems just and proper. Respectfully submitted, Ira Bodenstein, not personally, but as chapter 7 trustee for the estate of Peregrine Financial Group, Inc.

Dated: July 12, 2012 Robert M. Fishman (#3124316) Salvatore Barbatano (#0109681) Kimberly Bacher (#6285677) Shaw Gussis Fishman Glantz Wolfson & Towbin LLC 321 North Clark Street Suite 800 Chicago, Il 60654 Phone: (312) 541-0151 Fax: (312) 980-3888

By:

/s/ Robert M. Fishman One of his proposed attorneys

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CERTIFICATION CONCERNING EMERGENCY HEARING I hereby certify, as a member of the Bar of this Court, that I have carefully examined this matter and that there is a true necessity for an emergency matter. I certify further that the necessity for this emergency hearing has not been caused by any lack of due diligence or intentional action or failure to act on my part or by my client, but has been brought about only by the circumstances of this case. The reason this must be heard as an emergency matter is that, as a result of the Trustees immediate and ongoing need to operate the Debtors business, any delay in hearing this Motion will cause serious and irreparable harm to the Debtors estate. Therefore, the Trustee requests an emergency hearing with respect to the relief in this Motion. Respectfully submitted, Ira Bodenstein, not personally, but as chapter 7 trustee for the estate of Peregrine Financial Group, Inc.

Dated: July 12, 2012 Robert M. Fishman (#3124316) Salvatore Barbatano (#0109681) Kimberly Bacher (#6285677) Shaw Gussis Fishman Glantz Wolfson & Towbin LLC 321 North Clark Street Suite 800 Chicago, Il 60654 Phone: (312) 541-0151 Fax: (312) 980-3888

By:

/s/ Robert M. Fishman One of his proposed attorneys

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