MF Global Scrutinized on Money Move
Federal authorities investigating the demise of MF Global think that the firm began improperly moving customer money to a middleman on Oct. 27, according to people briefed on the matter.
The transfers, which indicate the brokerage firm misused client money earlier than previously believed, represent a new line of inquiry in the hunt for more than $1 billion in missing money.
In MF Global’s last days, the brokerage house was frantically winding down trades to shore up its balance sheet and stave off bankruptcy. Investigators are examining whether the firm — as part of that effort — began moving client money to the Depository Trust & Clearing Corporation, a financial intermediary responsible for closing out some of MF Global’s transactions, these people say.
The new details bolster claims that MF Global was careless with customer money, regardless of the company’s intentions. Authorities previously found that MF Global had used roughly $200 million of client funds to replenish an overdrawn account at JPMorgan Chase in London on Oct. 28, the last business day before the firm filed for bankruptcy.
Now, investigators are also looking at billions of dollars of transfers from MF Global to the Depository Trust & Clearing Corporation, a fraction of which is believed to be customer money. People briefed on the matter say the middleman passed some of the money to banks and other firms that traded with MF Global, which was once run by Jon S. Corzine, the former governor of New Jersey.
In addition, federal authorities are reviewing whether MF Global used customer money to pay the clearing corporation as part of a margin call. Financial intermediaries routinely require extra collateral when firms run into trouble. A different clearinghouse in London forced MF Global to pay roughly $300 million to back some of its bond holdings during its last week.
It is unclear how much customer money was transferred to the Depository Trust & Clearing Corporation, and whether officials at MF Global knew they were using client money. Haphazard recordkeeping and the flood of transactions in its final days might have concealed whether MF Global was deploying the customer cash for firm needs....MORE