New York Times
Federal regulators have discovered that hundreds of millions of
dollars in customer money has gone missing from MF Global in recent
days, prompting an investigation into the company's operations as it
filed for bankruptcy on Monday, according to several people briefed on
the matter.
The revelation of the missing money scuttled an 11th
hour deal for MF Global to sell a major part of itself to a rival
brokerage firm. MF Global, the powerhouse commodities brokerage run by
Jon S. Corzine, had staked its survival on completing the deal.
Now,
the investigation threatens to tarnish the reputation of Jon S.
Corzine, the former New Jersey Governor and Goldman Sachs chief who
oversaw MF Global's demise, making it the first American victim of
Europe's debt crisis.
What began as nearly $1 billion missing had
dropped to less than $700 million by late Monday. It is unclear where
the money went, and some funds are expected to trickle in over the
coming days as the firm sorts through the bankruptcy process, the people
said.
But regulators are examining whether MF Global diverted
some customer funds to support its own trades as the firm teetered on
the brink of collapse. If that was the case, it could violate a
fundamental tenet of Wall Street regulation: Customers' funds must be
kept separate from company money.
Such a finding would move the
discussion from sloppy internal controls at MF Global to something more
troubling. While the investigation is in its early days, it raises the
specter that regulators ultimately could sanction the firm or the
employees responsible.
MF Global and Mr. Corzine have not been accused of any wrongdoing.
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