Missing Dollars of MF Global's Clients Are Gone

Here’s a follow-up to my post “Why the Collapse of MF Global Should Frighten You.”

MF Global's CEO Jon Corzine, with Obama who had campaigned for Corzine's failed bid to be reelected NJ governor

On October 31, 2011, MF Global, a huge global financial derivatives broker, declared bankruptcy. In so doing, it became the largest Wall Street firm to collapse since the Lehman Brothers incident in September 2008, and the 8th largest bankruptcy in U.S. history.
John Carney reports for CNBC, Nov. 18, 2011, that hundreds of millions of dollars of customer funds missing from MF Global are probably “just gone.”

Carney received word from a lawyer briefed on the progress of the investigation being undertaken by various government regulators that investigators believe MF Global used customer money to make trades, such as buying sovereign debt securities.
Earlier there had been hope the money would turn out to be held as collateral in an account with one of MF Global’s creditors, such as JP Morgan Chase or Deutsche Bank. But that does not now seem to be the case.
Instead, the lawyer says, “What the investigation is focusing on now is who, if anyone, knew it was client money.”
MF Global used customer funds in a variety of ways, he says. In the futures business, MF Global was allowed to use “idle” cash in customer accounts to make investments on its own behalf. It would buy bonds and keep the coupon on them. The higher the coupon, the more profitable this was for the company.
The firm would also “borrow” from its clients accounts, posting collateral such as U.S. Treasurys. But as the New York Times has reported, the firm stopped backing the loans from customer accounts sometime in October.
Put bluntly, MF Global simply stole the cash.
Carney concludes that if that’s what happened, “it is probably impossible to recover the missing funds.”

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9 years ago

Skippy must be so proud…

9 years ago

obama like to many americans is to brain dead to know what in the world is going on…. the most believable lie will be brought forth to explain the collapse and repeated and yelled and blame bush the tea party and the republcans

Alice Wolf
9 years ago

Check it out. I just read that the bankruptcy court judge ruled that MF could carry on swindling their clients while the companies, there are more than one operating under the umbrella title MF are being wound down. He didn’t use exactly that terminology but the transcript is available and it rather ambiguously describes activities which the law does permit under this type of circumstance, should be allowed to continue during the wind down period so that people can make the money they would have made if the company was closed because it was bankrupt. Great! That’s good for everyone… Read more »

9 years ago

I want to know if any of that money ended up in Obama’s re-election fund. Solindra had a fundraiser for Obama after the loan was handed out.