No scams here. Just people who ****.
Fund Transfers Are Focus of MF Global Probe
Regulators have unearthed new details indicating MF Global Holdings Ltd. shifted hundreds of millions of dollars in customer funds to its own brokerage accounts in the days before its bankruptcy filing, according to people familiar with the matter.
Such moves could violate regulations stipulating that commodities brokers can't mix customer funds with brokerage funds. Brokerage funds often are used to back proprietary trading positions.
Scott O'Malia, second from left, commissioner of the Commodity Futures Trading Commission, has said it appears that MF Global failed in a "fundamental responsibility."
According to MF Global's internal records, the transactions were as large as hundreds of millions of dollars at a time, these people said.
It is common practice among futures brokers to maintain a buffer of firm capital in customer-segregated accounts to protect against possible customer losses, industry officials said. However, MF Global officials believe it was acceptable to use those funds when required for the company's needs, people familiar with the matter said.
It appears likely to regulators from their investigation so far that MF Global burned through all of its capital buffer during the week before the Oct. 31 bankruptcy filing, and then started tapping customer funds, according to people familiar with the matter.
Whether the apparent use of customer money occurred intentionally or by mistake in the confusion of the securities firm's moves to stave off bankruptcy isn't clear. But the money, estimated at about $600 million, still is missing and might never be recovered.
MF Global said in a statement Thursday that its employees are "actively cooperating" with the bankruptcy trustee and regulators. "Any characterization at this point of what occurred at MF Global is premature and inappropriate," the statement said.
A spokesman for MF Global's former chief executive, Jon S. Corzine, declined to comment.
In a separate development, a judge approved on Thursday the transfer of about $520 million in customers' cash-only accounts at MF Global. The transfer, which will start in about a week, represents about 60% of the $869 million held in the accounts. The rest is being held back to cover any possible shortfalls as the trustee continues to unwind MF Global.
At least 22,000 MF Global brokerage accounts will move to new dealers as part of the plan, which was a response to customers' pleas to get at least part of their assets back.
MF Global officials are still piecing together what happened in the last days before the bankruptcy filing.
Regulators suspect that MF Global might have tapped customer funds as it scrambled to meet margin calls from its counterparties. In recent months, the firm's massive $6.3 billion bet on European debt came under pressure as the economic and political situation in Europe worsened, leading to ratings agency downgrades of MF Global's debt. The firm might have also moved funds to meet demand by clients who had securities accounts at the broker dealer, people familiar with the situation.
"If they used client moneys to meet house margin calls, that's a misuse of client funds," said Ronald Filler, a law professor at the New York Law School.
According to the Commodity Exchange Act, customer funds at futures commission merchants "shall not be commingled with the funds of such commission merchant or be used to margin or guarantee the trades or contracts…of any customer or person other than the one for whom the same are held."
Commodity Futures Trading Commissioner Scott O'Malia said earlier this week that it "appears that MF Global failed this fundamental responsibility."
In its last days, MF Global appears to have moved cash out of customer accounts early in the trading day and returned it by the end of the day, says a person familiar with the matter.
But something seems to have gone amiss during the transfers. By Oct. 27, four days before the firm filed for bankruptcy protection, about $200 million was missing from customer accounts, according to people familiar with the matter. The following day, there was a shortfall of about $800 million or $900 million, the people say.
Experts say the events at MF Global have sparked a crisis of faith in the industry among commodity traders. "It's a sock to the stomach of the commodity markets," said Michael Greenberger, a law professor at the University of Maryland and former director of the CFTC's division of trading and markets. Segregated customer funds are "the third rail of commodities trading," he said.
More scams. Nothing to get mad about. Just keep focusing on homeless who **** on streets.
Fund Transfers Are Focus of MF Global Probe
Regulators have unearthed new details indicating MF Global Holdings Ltd. shifted hundreds of millions of dollars in customer funds to its own brokerage accounts in the days before its bankruptcy filing, according to people familiar with the matter.
Such moves could violate regulations stipulating that commodities brokers can't mix customer funds with brokerage funds. Brokerage funds often are used to back proprietary trading positions.
Scott O'Malia, second from left, commissioner of the Commodity Futures Trading Commission, has said it appears that MF Global failed in a "fundamental responsibility."
According to MF Global's internal records, the transactions were as large as hundreds of millions of dollars at a time, these people said.
It is common practice among futures brokers to maintain a buffer of firm capital in customer-segregated accounts to protect against possible customer losses, industry officials said. However, MF Global officials believe it was acceptable to use those funds when required for the company's needs, people familiar with the matter said.
It appears likely to regulators from their investigation so far that MF Global burned through all of its capital buffer during the week before the Oct. 31 bankruptcy filing, and then started tapping customer funds, according to people familiar with the matter.
Whether the apparent use of customer money occurred intentionally or by mistake in the confusion of the securities firm's moves to stave off bankruptcy isn't clear. But the money, estimated at about $600 million, still is missing and might never be recovered.
MF Global said in a statement Thursday that its employees are "actively cooperating" with the bankruptcy trustee and regulators. "Any characterization at this point of what occurred at MF Global is premature and inappropriate," the statement said.
A spokesman for MF Global's former chief executive, Jon S. Corzine, declined to comment.
In a separate development, a judge approved on Thursday the transfer of about $520 million in customers' cash-only accounts at MF Global. The transfer, which will start in about a week, represents about 60% of the $869 million held in the accounts. The rest is being held back to cover any possible shortfalls as the trustee continues to unwind MF Global.
At least 22,000 MF Global brokerage accounts will move to new dealers as part of the plan, which was a response to customers' pleas to get at least part of their assets back.
MF Global officials are still piecing together what happened in the last days before the bankruptcy filing.
Regulators suspect that MF Global might have tapped customer funds as it scrambled to meet margin calls from its counterparties. In recent months, the firm's massive $6.3 billion bet on European debt came under pressure as the economic and political situation in Europe worsened, leading to ratings agency downgrades of MF Global's debt. The firm might have also moved funds to meet demand by clients who had securities accounts at the broker dealer, people familiar with the situation.
"If they used client moneys to meet house margin calls, that's a misuse of client funds," said Ronald Filler, a law professor at the New York Law School.
According to the Commodity Exchange Act, customer funds at futures commission merchants "shall not be commingled with the funds of such commission merchant or be used to margin or guarantee the trades or contracts…of any customer or person other than the one for whom the same are held."
Commodity Futures Trading Commissioner Scott O'Malia said earlier this week that it "appears that MF Global failed this fundamental responsibility."
In its last days, MF Global appears to have moved cash out of customer accounts early in the trading day and returned it by the end of the day, says a person familiar with the matter.
But something seems to have gone amiss during the transfers. By Oct. 27, four days before the firm filed for bankruptcy protection, about $200 million was missing from customer accounts, according to people familiar with the matter. The following day, there was a shortfall of about $800 million or $900 million, the people say.
Experts say the events at MF Global have sparked a crisis of faith in the industry among commodity traders. "It's a sock to the stomach of the commodity markets," said Michael Greenberger, a law professor at the University of Maryland and former director of the CFTC's division of trading and markets. Segregated customer funds are "the third rail of commodities trading," he said.
More scams. Nothing to get mad about. Just keep focusing on homeless who **** on streets.
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