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MF Global situation
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MF Global situation

  #91 (permalink)
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MF Global?s original sin

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  #92 (permalink)
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Santelli says Chicago has long memories

This is still a hot topic in the futures trading community.

One Year Later - Santelli Rips Apart 'Connected' Corzine | ZeroHedge

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  #93 (permalink)
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Corzine knew he was ... "ste lin" erh. taking, money from customer accounts


Now We Know Which Senior MF Global Employee Told Investigators That Jon Corzine Had Direct Knowledge Of Customer Funds BeingStolen - Home - The Daily Bail

CME Chairman Terry Duffy tells the Senate that Jon Corzine was aware that customer accounts were being illegally tapped for MF Global collateral - Dec. 13, 2011.

This is the congressional clip...

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  #94 (permalink)
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from tradetowin's post:

MF Global?s original sin

"So, were MF Global customers up against a stacked deck from the beginning? When MF Global Holdings attorney Kenneth Ziman went to court the day after the firm declared Chapter 11 bankruptcy, he appeared in front of Judge Martin Glenn, whom he had worked with previously at a law firm. The judge asked his former colleague: “I’ve read a number of stories that deal with alleged shortfalls in customer property. Is that only in the registered broker-dealer?” Ziman answered, “All funds are accounted for, and I’m talking about the broker-dealer.” With that, Judge Glenn said, “Okay.”

No one, including regulators in attendence, disputed this misstatement or outright lie, and from then on, MF Global Inc. brokerage customers were on their own."

....

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  #95 (permalink)
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aquarian1 View Post
from tradetowin's post:

MF Global?s original sin

"So, were MF Global customers up against a stacked deck from the beginning? When MF Global Holdings attorney Kenneth Ziman went to court the day after the firm declared Chapter 11 bankruptcy, he appeared in front of Judge Martin Glenn, whom he had worked with previously at a law firm. The judge asked his former colleague: “I’ve read a number of stories that deal with alleged shortfalls in customer property. Is that only in the registered broker-dealer?” Ziman answered, “All funds are accounted for, and I’m talking about the broker-dealer.” With that, Judge Glenn said, “Okay.”

No one, including regulators in attendence, disputed this misstatement or outright lie, and from then on, MF Global Inc. brokerage customers were on their own."

....

I'm still not sure or understand how it was "illegal" to use customer funds. This is sanctioned by the Fed.

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.


The problem is there are no such limits in the UK so they can pretty much do anything within the UK subsidiary. My understanding was they lent the customer funds to their UK arm who used these customer funds to collateralize the European sovereign debt bet.

What we see here is another example of poor regulation where a firm can easily manipulate the rules by using offshore subs to exploit legal loopholes.

Unless I'm missing something obvious it doesn't appear this issue is being addressed as per this thread from the CTFC. The CTFC should be approaching the Fed and getting this issue addressed asap.

https://futures.io/brokers-data-feeds/21648-futures-broker-due-diligence-notes-p...p-pfg-10.html#post274059

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  #96 (permalink)
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djkiwi View Post
I'm still not sure or understand how it was "illegal" to use customer funds. This is sanctioned by the Fed.

Under the U.S. Federal Reserve Board's Regulation T and SEC Rule 15c3-3, a prime broker may re-hypothecate assets to the value of 140% of the client's liability to the prime broker. For example, assume a customer has deposited $500 in securities and has a debt deficit of $200, resulting in net equity of $300. The broker-dealer can re-hypothecate up to $280 (140 per cent. x $200) of these assets.


The problem is there are no such limits in the UK so they can pretty much do anything within the UK subsidiary. My understanding was they lent the customer funds to their UK arm who used these customer funds to collateralize the European sovereign debt bet.

What we see here is another example of poor regulation where a firm can easily manipulate the rules by using offshore subs to exploit legal loopholes.

Unless I'm missing something obvious it doesn't appear this issue is being addressed as per this thread from the CTFC. The CTFC should be approaching the Fed and getting this issue addressed asap.

https://futures.io/brokers-data-feeds/21648-futures-broker-due-diligence-notes-p...p-pfg-10.html#post274059

The prb is that these are/were segregated funds. According to MF Global annual report and according to the rules of the Clearing house there has to be up-to-the minute accurate accounting of all funds and all clients accounts by day's end (settlement). These are futures markets. MG Global fraudulently falsified the accounting records and 18.6 (?) Billion is gone. That's steee ling.

Also I'm not sure if your SEC rule is for stocks or futures but there are also Future exchange rules that were not followed. The reason he isn't in jail is that he has powerful connections, was a congressman, worked with GS, and the SEC won't touch him with his connections. The judge for the bankruptcy is a buddy of his defense lawyer.

This is a game and the regulators, lawyers and judges are all on the same side. - not the investors.

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  #97 (permalink)
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Judge Approves MF Global Liquidation Plan - NYTimes.com

Mike

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  #98 (permalink)
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CFTC Sues Jon Corzine Over MF Global Failure; Seeks to Ban Him From Futures Industry

 
 
 
 



Quoting 
U.S. regulators on Thursday settled charges against MF Global over the futures brokerage's collapse, and also charged former Chief Executive Jon Corzine and former Assistant Treasurer Edith O'Brien in connection with the alleged misuse of customer funds.

The Commodity Futures Trading Commission said MF Global had agreed to settle all charges against it, pay a $100 million penalty, and pay all the funds still owed to commodity customers.

MF Global collapsed in October 2011 under the weight of aggressive bets on sovereign debt, thin capital and questionable disclosures to investors. Customers were left reeling after it was revealed that more than $1 billion of their money could not immediately be found.

Former chairman and CEO of MF Global and former New Jersey Governor Jon Corzine.
Corzine, a former co-chairman of Goldman Sachs and New Jersey governor, was charged with violating his legal obligations to diligently supervise. He was also charged with not acting in good faith as a "control person" at the firm.

"Turning a profit is not the only job of the person at the top of a CFTC-regulated firm," CFTC Enforcement Director David Meister said. "Particularly in times of crisis, the person in control, like the CEO here, must do what's necessary to prevent unlawful uses of customer money, so that customers' money is still there if and when the music stops."

O'Brien was charged with aiding and abetting the company's misuse of customer funds. The CFTC said that O'Brien was behind the improper transfer of hundreds of millions of dollars from customer accounts to meet the brokerage's other obligations as it experienced a liquidity crisis.

Internal Conversation Recordings Found in MF Global Case
CNBC's Kate Kelly offers details of the lawsuit against Former MF Global CEO Jon Corzine, and former executive Edith O'Brien; and CFTC Commissioner Bart Chilton, wants to ensure customers that the government is looking out for them.
The CFTC is seeking full restitution and penalties against Corzine and O'Brien, as well as trading and registration bans against them.

Late Thursday, Corzine attorney Andrew Levander shot back, saying the lawsuit against his client has no merit.

"This is an unprecedented lawsuit based on meritless allegations that Mr. Corzine failed to supervise an experienced back-office professional who was located in a different city and who did not report to Mr. Corzine or even to anyone who reported to Mr. Corzine," Levander said in a statement. "After 20 months of thorough investigations by the Department of Justice, two bankruptcy trustees, and the CFTC, no evidence has been found that contradicts Mr. Corzine's sworn testimony before Congress. Mr. Corzine did nothing wrong, and we look forward to vindicating him in court."

Evan Barr, O'Brien's lawyer, had no immediate comment.

A statement issued by the MF Global trustee for liquidation said that it has so far distributed $4.981 billion to former customers of the firm.

"The Trustee's investigation showed potential causes of action, including claims for breach of fiduciary duty and negligence, might be asserted against former MF Global CEO Jon Corzine, former MF Global Assistant Treasurer Edith O'Brien and others," the statement said.

Mike

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  #99 (permalink)
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MF Global Admits Liability; Will Pay $1.2Bn Restitution & $100MM Penalty | Zero Hedge

The CFTC has won a consent order against MF Global requiring it to pay $1.212 billion in restitution to customers and a further $100 million civil penalty:

*MF GLOBAL TO PAY $1.2 BLN RESTITUTION, $100M PENALTY
*CFTC:PENALTY TO BE PAID AFTER MF FULLY PAYS CUSTOMERS/CREDITORS
*CFTC:LITIGATION CONTINUES VS CORZINE,O'BRIEN,MF GLOBAL HOLDINGS
*CFTC: MF GLOBAL ADMITS TO ALLEGATIONS OF LIABILITY IN ORDER
The big question is - of course - where is the money coming from?

Full CFTC Statement:


Quoting 

The U.S. Commodity Futures Trading Commission (CFTC) obtained a federal court consent Order against Defendant MF Global Inc. (MF Global) requiring it to pay $1.212 billion in restitution to customers of MF Global to ensure customers recover their losses sustained when MF Global failed in 2011.

The consent Order, entered on November 8, 2013 by U.S. District Court Judge Victor Marrero of the U.S. District Court for the Southern District of New York, also imposes a $100 million civil monetary penalty on MF Global, to be paid after MF Global has fully paid customers and certain other creditors entitled to priority under bankruptcy law. The Trustee for MF Global obtained permission from the bankruptcy court to pay restitution in full to customers to remedy any shortfall with funds of the MF Global general estate.

The consent Order arises out of the CFTC’s complaint, filed on June 27, 2013, charging MF Global and the other Defendants with unlawful use of customer funds (see CFTC Press Release 6626-13, June 27, 2013). In the consent Order, MF Global admits to the allegations pertaining to its liability based on the acts and omissions of its employees as set forth in the consent Order and the Complaint. The CFTC’s litigation continues against the remaining defendants: MF Global Holdings Ltd., Jon S. Corzine, and Edith O’Brien.

Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement, stated, “Division staff have worked tirelessly to ensure that 100 percent restitution be awarded to satisfy customer losses. The CFTC will continue to ensure that those who violate U.S. commodity laws and regulations designed to protect customer funds will be vigorously prosecuted.”
The CFTC’s Complaint charged MF Global, a registered Futures Commission Merchant (FCM), with violating provisions of the Commodity Exchange Act and CFTC Regulations intended to protect FCM customer funds and requiring diligent supervision by registrants. Specifically, the Complaint charged that during the last week of October 2011, MF Global unlawfully used customer segregated funds to support its own proprietary operations and the operations of its affiliates. In addition to the misuse of customer funds, the Complaint alleged that MF Global

(i) unlawfully failed to notify the CFTC immediately when it knew or should have known of the deficiencies in its customer accounts,

(ii) made false statements in reports it filed with the CFTC that failed to show the deficits in the customer accounts,

(iii) used customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid in violation of CFTC regulation, and

(iv) failed to diligently supervise the handling of commodity interest accounts carried by MF Global and the activities of its partners, officers, employees, and agents.

Mike

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  #100 (permalink)
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@TabbFORUM: NEWS: CFTC Fines MF Global's Parent Company $100 Million (WSJ)($) tinyurl.com/m55uzf7

https://twitter.com/TabbFORUM/status/548313957950185472

Sent from my phone

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