More than a decade before he allegedly began hiding more than $200 million of misappropriated client money in a scheme that unraveled this week, Wasendorf joined three other Chicago traders as founding investors in one of Romania's largest real estate development groups, Avrig 35 Group, which was valued at more than $1 billion at its height in 2007.

But since 2007 the paper value of his holdings has crashed from around $150 million to less than $45 million, as Avrig has written down investments.

As Avrig's complex web of dozens of firms struggles to trade its way out of difficulties, Alexander Hergan, Wasendorf's Romanian-born business partner and a former options trader and founding member of the Chicago Board of Options Exchange (CBOE), hopes the drama in Iowa doesn't upset the firm's recovery.

"I don't want any kind of blemish from Russell's situation to spill into the Avrig Group," he said in a telephone interview from Romania.

"Avrig 35 was put into insolvency just recently but we've been successful in working our way out of this. We plan to pay down $50 million of our debts in the next two months. We have saved this company in the past year."

The firm, well-known in Romania for having built the country's tallest building, adds an unlikely new dimension to the deepening mystery around Wasendorf, whose attempted suicide on Monday set off an FBI investigation, a lawsuit from regulators, and the collapse of PFGBest into bankruptcy.

Avrig's problems after the 2008 global financial crisis also shed new light on Wasendorf's finances, the subject of intense scrutiny as investors seek to trace the missing U.S. funds.

Hergan said he didn't believe Wasendorf's alleged misuse of PFGBest customer funds could be related to Avrig's financial problems.

Asked if he was concerned U.S. regulators may want to look at Avrig as part of their investigation, he said the group would cooperate fully with any investigation.

"Of course we've thought about it, but we're not concerned. They could go after his assets, they could go after his shares in Avrig Group, but the other shareholders will buy them as the value is currently depressed," Hergan said.

"There is nothing we have to hide."

GO HOME AND GO BIG

Hergan, who emigrated to the United States in 1966 at the age of 19, says he and Mark Proskine -- father of current Avrig CEO Matthew Proskine -- met Wasendorf in the 1990s, when the Iowa native attempted to buy their trading seats on a Chicago exchange.

While the deal eventually fell through, they maintained contact. Years later, Hergan pitched the idea of investing together in his native Romania, which was entering a period of explosive economic growth a decade after the 1989 collapse of Nicolae Ceauşescu's brutal communist regime.

Hergan said that Wasendorf, Hergan, the elder Proskine -- and one other Chicago-based investor he declined to name -- put up $500,000 each in 1999 to launch the venture. Hergan moved back to Bucharest the same year.

Avrig rode the boom. The firm was involved in the construction of some of the largest buildings in Romania, including a partnership that built the country's highest skyscraper, the 26-story Bucharest Tower Center, in 2007.

At its peak in 2007, Wasendorf's Romanian investment would likely have dwarfed the value of PFGBest. It was at this time that Wasendorf embarked on his plan to relocate PFGBest from Chicago to his home state of Iowa, designing an $18 million, 15,000-square-meter custom-built complex in Cedar Springs.

NEVER VISITED

Wasendorf wasn't involved in the day-to-day running of Avrig, Hergan said, and never visited Romania. But the men would talk by telephone, and met in Chicago at least once a year for the group's annual investor meeting.

Avrig expanded to more than 60 companies by 2008, branching into sectors as diverse as television channels, retail stores and asset management. By 2007, UBS bank was advising the company about listing on the London Alternative Investment Market (AIM), and valued the group at more than $1 billion.

On paper, Wasendorf's initial $500,000 investment in the group had ballooned. While his stake in the company had been diluted to less than 15 percent as Hergan brought in other investors, it would still have been worth as much as $150 million, or 300 times the original investment in just 8 years.

Plans to list Avrig in London collapsed with the onset of the financial crisis.

"When the hard times hit...the banks just stopped funding us, some when we were right in the middle of construction," Hergan said. "The market just stopped functioning."

By July of last year, the group faced a series of petitions from creditors trying to push Avrig into insolvency due to mounting debts. The Bucharest Tower Center skyscraper had stood empty for at least three years, and Avrig hadn't sold a significant property since the onset of the crisis.

Financial data obtained by Reuters from the Romanian finance ministry showed that Avrig had amassed total debts of about 135 million lei ($36.6 million) on its balance sheet by 2010. That has more than doubled to around $80 million now, according to Hergan.

While the company is still operating, its bank account balance was just 13,240 lei ($3,600) at the end of 2010, the data showed. It had made a loss in each of the past three years.

CAPITAL CALL

Between 2007 and 2011, Wasendorf contributed cash to three to four relatively small 'capital calls' from Avrig, said Matthew Proskine, in the same telephone interview. He said this culminated in a larger $750,000 investment last year.

"They have all been repaid with interest already," Hergan said.

Hergan said when he had met Wasendorf last year "he seemed a little more tense" but that he hadn't thought anything of it at the time.

Wasendorf is currently at an Iowa hospital after apparently attempting to commit suicide in his car outside PFGBest's Cedar Falls headquarters on Monday.

"I never dreamt of the possibility of him being involved in something like this," Hergan said. "When these things happen people are left shaking their heads."

(Reporting By David Sheppard and Radu Marinas; Editing by Jonathan Leff and Martin Howell; additional reporting by Joshua Schneyer and Ann Saphir in Chicago)

• A Permanent Economic Emergency