CME Official: MF Global Head Knew of Loan; Money Still Missing

December 15, 2011 Bookmark and Share

Congressional committees held two more hearings on the MF Global bankruptcy this week, asking more than a day and a half of questions but finding few answers – and none of the missing customer money.

MF Global, a derivatives broker-dealer, declared bankruptcy on Oct. 31. Since that time, investigators have been working to determine where an estimated $1.2 billion in missing customer money went in the final, hectic days of the company’s life.

It is widely suspected – though there have been no formal charges made – that the money held for customers was somehow mixed in with the firm’s own money, and then lost or put up to cover a firm margin call.

At a Senate Agriculture Committee hearing on Tuesday, CME Group Executive Chairman Terrence Duffy testified someone in his company has indicated former MF Global chief executive Jon Corzine knew about a loan from customer to firm accounts – a revelation that is the only real break in the case thus far.

At a House Financial Services Committee Subcommittee on Oversight Investigations hearing held Thursday, Corzine, who had completed his Senate testimony before Duffy was empanelled, again denied directing or intending for customer money to be used.

In addition to Corzine, Agriculture Committee Members in the Senate heard from a farmer panel about the impacts they are seeing from the funds loss. Additional panels included other MF Global executives and government and industry regulators.

It now appears that through a claims process, customers who have not been made whole may receive slightly more than 70 percent of their funds.

In addition to the financial losses faced by former MF Global customers, the circumstances surrounding the bankruptcy have created serious uncertainty about the safety of customer money held by brokers.

NAWG will remain engaged in this issue as Congress, the CFTC and others continue their investigations. A letter sent previously by the agriculture industry on this matter is at http://www.wheatworld.org/issues/othercorrespondence/.