Thursday, November 03, 2011

Corzine's MF Global Missing $633 Million

In the wake of the collapse of MF Global, regulators have found that $633 million is missing. The regulators also found that the company sought to hide transactions from regulators as bankruptcy was looming:
MF Global, the dealer-broker firm run by former Gov. Jon Corzine, made several last minute transfers of customer funds in a manner apparently designed to avoid detection as it headed for bankruptcy, an industry regulator said Wednesday.

The statement, by CME Group of Chicago, came as federal regulators probe whether the company used customer funds for company business.

Federal regulations require that customer and company funds be kept separate. Lawyers for the Chicago Futures Trading Commission, which regulates futures and options trading, said $633 million in customer commodities funds is missing, Bloomberg News reported.

CME Group, the owner-operator of the Chicago Mercantile Exchange, said that any transfer of customer funds occurred after CME completed an audit last week.

"The results of our review indicated that MF Global was in compliance with its segregation requirements," in the audit period, CME said. But the statement added that "It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection."

The company, which filed for bankruptcy Monday, did not report the transfers to the Chicago Futures Trading Commission, which regulates futures and options trading, until early Monday morning, CME said.
It would appear that someone authorized these transactions following the audit period so as to cover the losses that were pushing the firm into insolvency and ahead of the bankruptcy sale to another brokerage.

That's criminal action - and those involved, including Jon Corzine must be held accountable.

Corzine pushed the company to get into sovereign debt bets as a way to expand a profit center, and the bets went badly particularly because the company didn't have sufficient collateral to cover the positions if they went bad.

The company failed to maintain adequate controls separating client accounts from the company's own monies.

The sale of MF Global prior to the bankruptcy was scuttled when the potential buyer ended up finding discrepancies. Turns out that the potential sale showed the failures and exposed all kinds of problems with the firm.

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