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Judge rejects U.S. Bank's motion to dismiss CFTC lawsuit

Nov 5 (Reuters) - A federal judge rejected U.S. Bank's motion to dismiss a lawsuit that accused the bank of letting Peregrine Financial founder Russell Wasendorf Sr secure loans against money that belonged to his brokerage's customers, a court filing showed.

In June, the Commodities Futures Trading Commission (CFTC) filed a lawsuit against U.S. Bank N.A., a unit of U.S. Bancorp , saying the bank had a segregated account for Peregrine's customer funds but treated the account as if it were "a Peregrine commercial checking account."

CFTC argued in its lawsuit that more than $325 million flowed through the segregated customer account between May 2005 and June 2012, and that Wasendorf misappropriated about $215 million of that amount.

The lawsuit was the first against a bank tied to the collapse of Peregrine, which filed for bankruptcy protection in July 2012 after Wasendorf confessed to bilking his clients in a nearly 20-year-long fraud.

Wasendorf began serving a 50-year sentence in February.

Lawyers for U.S. Bank filed a motion to dismiss the lawsuit, saying the CFTC was trying to shift responsibility for a Ponzi scheme to the bank, even though the bank itself was a victim of the scheme.

However, Judge Linda Reade on Tuesday rejected U.S. Bank's arguments, paving the way for the lawsuit to proceed for further hearings.

"The court shall deny the motion to the extent that it asks the court to dismiss the Commission's claim that U.S. Bank improperly held Peregrine customer funds," Reade wrote in her ruling.

U.S. Bank could not immediately be reached for comment by Reuters outside regular business hours.

The case is: U.S. Commodity Futures Trading Commission vs U.S. Bank, N.A., U.S. District Court, Northern District of Iowa, No 13-cv-2041.