David Goldman for The New York TimesJon S. Corzine on the trading floor of MF Global last year.
After MF Global discovered a nearly $1 billion shortfall in customer money in the early hours of Oct. 31, the brokerage firm lined up a last-ditch — but ultimately unsuccessful — effort to fill the hole, according to people briefed on the matter.
At the time, the revelation of missing money was about to scuttle a last-minute deal to sell part of MF Global to another brokerage firm. MF Global executives scrambled to assemble money from a variety of sources, including its own accounts at banks and clearinghouses, said these people, who requested anonymity because investigations into the matter were incomplete.
The firm was ready to proceed with the wire transfers, but was forced to abort at the last second. Hours later, MF Global filed for bankruptcy protection. And within days, Jon S. Corzine, the former New Jersey governor, had resigned as the firm’s chief executive.
Details surrounding the failed transfers are spotty, though investigators have since criticized the poor condition of MF Global’s books, which may have presented an incorrect picture of how much money the firm had at the time.
It is possible that MF Global lacked the necessary money to complete the transfers. In other cases, the firm’s banks, including JPMorgan Chase, may have needed additional time to verify its account balances.
Part of the reason that MF Global’s records were in disarray was a flurry of asset sales that the firm made in its last week in a frenzied effort to raise money.
What caused the initial shortfall remains the subject of wide-ranging investigations by regulators and the Justice Department. Even the precise amount that is missing has caused some dispute, with estimates ranging from about $600 million to more than $1.2 billion.
What is clear to investigators is that MF Global improperly used customer funds for its own needs during its final chaotic days, according to people with knowledge of the inquiries. That move essentially breached a fundamental Wall Street rule: customer money must remain separate from company cash.
Neither MF Global nor Mr. Corzine has been accused of any wrongdoing.
About $200 million in customer money that disappeared from MF Global surfaced at one point at JPMorgan in Britain during that last week, the people with knowledge of the inquiries have said.
That discovery could prove to be a major breakthrough in the weeks-long search for the missing funds, though hundreds of millions of dollars in customer money remains unaccounted for.
MF Global sent the $200 million to JPMorgan, some people close to the investigations believe, after it overdrew an account at the bank. JPMorgan raised questions about the money , but it never received assurances from MF Global.
It is possible that JPMorgan no longer holds the money, having served only as a middleman between MF Global and several trading partners.
Article source: http://feeds.nytimes.com/click.phdo?i=ef423e70020e13d51f7e3e78acfe06df
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