Petters was raised with six siblings in St. Cloud, Minnesota. He worked at his family's tailor, fur and fabric shop that was founded by his great-grandfather and operated for over 100 years. In 1973, while still in high school, he started Ear Electronics, a mail-order stereo company aimed at college students. Petters only completed one quarter of college before dropping out to pursue a career. In the early 1980s, Petters worked in Colorado as a regional manager at an electronics store chain; when that business went bankrupt he purchased five of its locations in Colorado and Kansas.
Petters Group Worldwide In 1988, Petters moved back to Minnesota and founded Amicus Trading, a wholesale brokerage; the name was later changed to The Petters Company, and it marketed consumer merchandise. In 1995 he started Petters Warehouse Direct to sell closeout, overstock and bankrupt company merchandise from a store in Minnetonka, Minnesota, additional locations followed in the Twin Cities and greater Minnesota. In 1998 he went online to sell discounted merchandise through redtag.com, operated by RedTag Inc.; by 2000 he sold his Petters Warehouse Direct stores to focus on his online business, based in Eden Prairie, Minnesota. He teamed up with direct-mail merchandise company Fingerhut Companies Inc. in 2001 to start a new online store, Redtagbiz.com, which reported sales of $1 billion per year at one point.
When Fingerhut's owner, Federated Department Stores, decided to sell or close the company in 2002, Petters, teaming with former Fingerhut chairman Ted Deikel, made an offer to buy the Fingerhut name, customer list, and buildings in St. Cloud, Minnetonka, Plymouth, Minnesota and Tennessee. The purchase was made in June 2002 and all of Petters' operations moved into Fingerhut's former headquarters in Minnetonka. Deikel took over Fingerhut Direct Marketing Inc., which created the catalogs, and Petters took over Fingerhut Fulfillment, based at a St. Cloud distribution center; the new Fingerhut restarted with online and catalog sales in November 2002. In April 2003, The Petters Group, with two minority investors, purchased uBid. The same month, Fingerhut Direct Inc. announced it had obtained a $100 million line of credit to finance inventory and receivables. In 2003, Petters invested in former Minnesota State Senator Ted Mondale's Nazca Solutions. Deikel sold his interest in Fingerhut in 2004.
In January 2005, Petters Group Worldwide purchased the Polaroid brand for $426 million, with plans to use it on consumer electronics and new technologies. In 2006, Petters Group Worldwide acquired Sun Country Airlines. Petters Group Worldwide became a diverse holding company with 3,200 employees and investments or full ownership in 60 companies, of which it actively managed 20. With offices in North America, South America, Asia, and Europe, it had $2.3 billion in revenue in 2007.
The FBI put Petters under investigation for his role in a fraud scheme involving more than $100 million in investments, with estimates ranging up to $3.65 billion. On September 24, 2008, federal investigators raided the Petters headquarters in Minnetonka and searched Tom Petters' Wayzata home. Documents released by the FBI, IRS and other federal agencies noted that they were seeking evidence of a scheme to lure investors into funding a company based on tens of millions of dollars in purchases and sales that never occurred. The documents noted that a witness associated with Petters and his company came forward with documents and other information, and later wore a hidden microphone and recorded several conversations involving Petters and others who carried out the fraud. The affidavit alleges Petters is caught on tape, repeatedly admitting to the fraud scheme by providing false information to investors; in addition, Petters admits to cheating on his taxes. On September 29, he resigned as the head of Petters Group Worldwide.
On October 3, he was arrested at gunpoint in his home. He was denied bail after prosecutors produced documents that alleged Petters had encouraged another person involved with the case to leave the country, that he regretted turning over his passport, and that he had previously spoken about fleeing the country if the fraud scheme was discovered. The U.S. Attorney's Officecharged him with mail fraud, wire fraud, money laundering and obstruction of justice.
On December 2, 2009, Tom Petters was found guilty in the U.S. District Court in St. Paul, Minnesota on 20 counts of wire and mail fraud. Reporters from the Minneapolis Star Tribune stated that it is extremely unlikely that Petters will ever again live as a free citizen. The US federal government is now seeking forfeiture of all Petters' assets.
Petters was awarded "Corporate Leader of the Year" in 2001 by the Juvenile Diabetes Research Foundation, Distinguished Humanitarian Award in 2003 by B'nai B'rith, and noted in the Big Brothers Big Sisters Odyssey Awards 2005.