Millions missing from Corzine-run firm

NEW YORK?? The brokerage firm run by former New Jersey governor Jon Corzine became more deeply mired in controversy Tuesday when regulators said it failed to protect its customers' money by keeping it separate from the firm's own funds.

Hundreds of millions of dollars of customer's money have gone missing from the brokerage firm, MF Global, sources told The New York Times.

MF filed for bankruptcy Monday following bad bets on euro zone debt.

The discovery of the missing millions stopped a last-minute deal to sell a major part of MF Global to another brokerage firm from going ahead, The New York Times reported.

The company's main exchange regulator, CME, said Tuesday that MF did not separate its customers' accounts from the firm's funds as required by law, Reuters reported.

"CME has determined MF Global is not in compliance with Commodity Futures Trading Commission and CME customer segregation requirements," CME Group Inc Chief Executive Craig Donohue said. Futures brokers must keep customer accounts separate from each other and from the firm's own money.

Donohue said CME is looking into exactly what happened at MF Global.

Corzine, 64, who once ran Goldman Sachs before becoming a U.S. senator and then governor of New Jersey, had been trying to turn the more than 200-year-old MF Global into a mini Goldman by taking on more risky trades.

But once regulators forced it to fully disclose the bets on debt issued by countries including Italy, Portugal and Spain, it rapidly unraveled with no buyers willing to step in.

The fall of the group sent shockwaves through commodities markets, as traders feared the damage could spread, or similar problems could occur with other players.

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

MF Global files for bankruptcy protection

The Times, citing "people briefed on the matter," said it was initially thought some $950 million was missing, but this figure has dropped to less than $700 million.

No accusation of wrongdoing
The paper said that MF Global and Corzine had not been accused of doing anything wrong. Regulators are trying to establish if customer funds were misallocated.

MF Global's shares plunged last week as its credit ratings were cut to junk.

The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier Monday, a person familiar with the matter said.

KPMG, appointed as administrators to MF Global's UK arm, said it had been busy closing out positions all day under a new UK regime set up to prevent a repeat of the slow and painful work-out of the 2008 collapse of Lehman Brothers.

"It's still a large number. It's still billions," Richard Fleming, KPMG's head of restructuring, told Reuters. "We'll know a lot more at the end of the day," he said.

Fleming said he was confident clients would see their money again: "Our strategy this morning has been ... where we have clients whose position is reconciled, and are due funds, then that money will flow," he said.

MF Global was not immediately available to comment on the Times' report.

'Grave concerns'
Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's chief operating officer, Bradley Abelow, said in a court filing.

One of the regulators that pressed MF Global, the CFTC, was unhappy with the brokerage's failure to give it the required data and records.

"(T)o date we don't have the information that we should have," said a source close to the CFTC.

In the end, regulators and markets reacted swiftly to MF Global's troubles, which may have been exacerbated by Corzine's affinity for risk-taking over the course of a career that took him to the top echelons of Wall Street and then into politics.

"They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face, and brought the company down," said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.

Reuters contributed to this report.

Source: http://www.msnbc.msn.com/id/45114515/ns/business-us_business/

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