Corzine Officially Charged By CFTC For Filing False Reports, Commingling Funds And Other Violations

Tyler Durden's picture

And now can we please fast forward to the wrist-slap settlement. Of course, assuming there is no "settlement", what dreadful fate await Corzine? "The CFTC also seeks full restitution and penalties against Holdings, Corzine, and O’Brien, in addition to trading and registration bans and injunctions against Corzine and O’Brien." Not the dreaded registration ban. Anything but the dreaded registration ban...

From the CFTC:

CFTC Charges MF Global Inc., MF Global Holdings Ltd., Former CEO Jon S. Corzine, and Former Employee Edith O’Brien for MF Global’s Unlawful Misuse of Nearly One Billion Dollars of Customer Funds and Related Violations

Settlement of charges against MF Global, subject to court approval, directs payment of all funds still owed to commodity customers and imposes a $100 million penalty against the company

Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today filed an enforcement action in the United States District Court for the Southern District of New York against MF Global Inc. (MF Global), a registered futures commission merchant (FCM), MF Global Holdings Ltd. (Holdings), former Chief Executive Officer of MF Global and Holdings Jon S. Corzine, and former Assistant Treasurer of MF Global Edith O’Brien based on, among other violations, MF Global’s unlawful use of customer funds that harmed thousands of customers and violated fundamental customer protection laws on an unprecedented scale.

MF Global has agreed to settle all charges against it on terms set forth in a proposed order that is subject to court approval and includes 100% restitution of the approximately $1 billion lost by all commodity customers when the firm failed on October 31, 2011. Commissioner Jill Sommers stated, “I am pleased that the MF Global Trustee has agreed to settle the charges against the company. There is nothing more important than doing everything possible to make full restitution to all commodity customers. I am also proud of the members of the Division of Enforcement team, who have worked so hard on this case to bring us to where we are today.”

According to the Complaint, Corzine, a former U.S. Senator and New Jersey Governor with more than twenty years of Wall Street experience, joined MF Global as CEO in March 2010 with a plan to transform the firm from a futures broker into a major investment bank. Corzine’s strategy called for making increasingly risky and larger investments of the firm’s money. In the summer and fall of 2011, as MF Global’s need for cash was rising and its sources of cash were diminishing, Corzine knew that the firm was relying more and more on proprietary funds that it held alongside customer funds in FCM customer accounts. During this time, Corzine did not enhance MF Global’s deficient systems and controls sufficiently to ensure that the firm’s increasing reliance on FCM cash did not result in unlawful uses of customer money. Ultimately, these failures contributed to the massive customer losses.

As alleged, during October 2011, MF Global was on the brink of failure and in desperate need of cash to survive. As Holdings’ Treasurer told Holdings’ CFO at that time, in one of many recorded phone calls obtained by the CFTC, the firm was “skating on the edge,” without “much ice left.” Corzine was warned about the firm’s liquidity stresses, and he knew that the firm violated its own policy that had been designed to protect customer funds. Holdings’ Treasurer recommended to Holdings’ CFO in a recorded call, “we have to tell Jon that enough is enough. We need to take the keys away from him.”

In the last week of October 2011, with virtually no other sources of immediate cash to turn to, the firm repeatedly and unlawfully used customer funds for firm needs, ultimately leaving it nearly $1 billion short of customer funds. In that last week, Corzine is alleged to have been aware of the firm’s true low cash balance, even as he directed the firm to continue paying large obligations without inquiring how the firm could come up with the money to do so. Corzine is charged for the firm’s violations as an MF Global “control person” who, among other things, did not act in good faith and is also charged with violating his legal obligations to diligently supervise.

David Meister, the CFTC’s Enforcement Director, said, “Turning a profit is not the only job of the person at the top of a CFTC-regulated firm. 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. The allegations in our Complaint serve as a stark reminder that we will enforce the law against responsible individuals at all levels of a firm to ensure that customer funds are properly safeguarded every minute of every day.”

O’Brien, MF Global’s Assistant Treasurer, is charged with aiding and abetting the firm’s misuse of customer funds. According to the Complaint, she directed, approved, and/or caused improper transfers of hundreds of millions of dollars from customer accounts to help meet the firm’s needs during the final days of October 2011, while knowing that MF Global did not have sufficient proprietary funds available in those customer accounts for those transfers. The Complaint alleges that O’Brien remarked in a recorded telephone conversation that it “could be game over” from a regulatory perspective if funds were not returned to customer accounts on Friday, October 28, 2011, MF Global’s final business day.

With respect to the company defendants, in addition to the misuse of customer funds described above, the Complaint charges 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) filed false reports with the CFTC that failed to show the deficits in the customer accounts; and (iii) used customer funds for impermissible investments in securities that were not considered readily marketable or highly liquid in violation of CFTC regulation; and that Holdings controlled the operations of MF Global and is therefore liable as a principal for MF Global’s violations of the Commodity Exchange Act and CFTC regulations.

If approved by the United States District Court and the United States Bankruptcy Court, the proposed settlement of all charges against MF Global will require 100% restitution of all remaining commodity customer claims. The proposed order also includes the imposition of a $100 million penalty, which can be paid to the extent MF Global has not fully exhausted all available funds and assets paying customers and then other creditors entitled to priority under bankruptcy law.

The CFTC also seeks full restitution and penalties against Holdings, Corzine, and O’Brien, in addition to trading and registration bans and injunctions against Corzine and O’Brien.

The CFTC appreciates the assistance of the U.S. Attorneys’ Offices for the Southern District of New York and the Northern District of Illinois, the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Financial Conduct Authority in the United Kingdom.

CFTC Division of Enforcement staff members responsible for this case are Candice Aloisi, Elizabeth Brennan, Patryk Chudy, Christopher Giglio, Sheila Marhamati, David W. Oakland, Joseph Rosenberg, Michael Berlowitz, Karin Roth, Chad Silverman, K. Brent Tomer, Douglas K. Yatter, Steven Ringer, Lenel Hickson, Stephen J. Obie, and Vincent McGonagle. Jeremy Christianson from the CFTC’s Office of Data and Technology also assisted in this matter, along with staff from the CFTC’s Division of Swap Dealer and Intermediary Oversight and Division of Clearing and Risk.

Full complaint:

 

 

MF Global Complaint by zerohedge

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ZerOhead's picture

Bankfine for Corzine...

YuropeanImbecille's picture

Criminals are never very amusing. It's because they're failures. Those who make real money aren't counted as criminals. This is a class distinction, not an ethical problem.

max2205's picture

Nothing a small donation to the Obama warchest won't solve.....

max2205's picture

Even Eron Schilling payed Obama $40 mill to get a 10 year reduction in time....shit never ends my friends

ZerOhead's picture

Say... just a stupid question here... but where exactly does the trustee for MFG get the $1,000,000,000.00 from to pay back the segregated accounts that Corzine stol... err... rehypothecated it from?

http://finance.yahoo.com/news/mf-global-ends-bankruptcy-trustee-02030616...

JPMorgan, agent on MF Global's $1.2 billion revolving credit facility, is slated to recover as much as 76 percent of its total claim. Unsecured creditors of MF Global's finance and parent units are slated to recover around 34 percent of their claims.

francis_sawyer's picture

Get down & ready to do some pushups people... Our 'hero of the day' is about to scarf down another jelly donut...

NotApplicable's picture

Free Jon Corzine!*

*with purchase of another bankster of greater or equal value

DeadFred's picture

Despite the obvious fact that Corzine deserved much more than this what is happening is not 'nothing'. This is one more sign that the Kenyan guy is losing his grip on events. <Big Smile>

dryam's picture

He won't have any problem paying the $50 fine after he's conficted.

ebworthen's picture

I doubt he is conflicted ;-)

He may be convicted, and the $50 will come out of the victims' settlement.

ParkAveFlasher's picture

"Alright Jon, just don't do it again and pay the clerk on the way out."  </americanjustice>

Triggernometry's picture

Amazing the kind of backbone people at CFTC find in themselves when PM's take a hit...

Pladizow's picture

At worst he'll have to give the CFTC 10% of what he stole - and that will come from the Obummer fund raisers!

xtop23's picture

Precisely. 

The CFTC finding religion........ now!!??

Not a gd chance. 

ParkAveFlasher's picture

Time to boost margin requirements!

Manthong's picture

So does this mean we can get gold back down to 42 bucks?

Theosebes Goodfellow's picture

~"!!!WHAT DIFFERENCE DOES IT MAKE?!?!?!?!!!!"~

(Sorry, just having a Hillary moment....)

bank guy in Brussels's picture

Indeed

« Today US business is measured by what you stole minus the fine you paid. »

- Jim Sinclair, Mineset

Skateboarder's picture

Where the stole is in the billions of dollars, fined is in the millions of dollars, and speculation is in the trillions of dollars. Gotta love healthy orders of magnitudes...

centerline's picture

Go big or go home.

I was always told that if I was going to steal, make it massive.  While I would never commit such crimes, I have to admit that I seriously underestimated what "massive" means.

Totentänzerlied's picture

"Just fuckin' take it!"

-John Corzine's financial advice

McMolotov's picture

"Baliff, whack his pee-pee!"

</Cheech and Chong>

XitSam's picture

This is cover so he can say his critics are wrong because he was found not guilty.  Predetermined verdict or the charges wouldn't have been brought.

CaptainObvious's picture

Yeah, it's about fucking time they charged this pathological douchewad, but his punishment will consist of 1 year's jail time (suspended sentence, natch) and a fine of 1% of what he stole.  Not mentioned will be the $40 million in bribes he will pay out to get off that light.  Lady Justice isn't blind, she's retarded.

MayIMommaDogFace2theBananaPatch's picture

...you left out next Governor of New Jersey.  (if Jerry Brown can do it -- hell!)

deKevelioc's picture

But there is no manipultion of the silver and gold market.

disabledvet's picture

again "Copper is at 3 bucks a pound. that's your cost for mining silver." know who you're taking on when you do this stuff too. 50 bucks for silver? in 1979? amazing. impressive. dead. buried.

Manthong's picture

Look at art .. and whacko condo's at the top of big buildings in the metro's..

They are telling you something.. 

oh, and I continue to follow the value of fine watches..

what do the money people value?

it has something to do with scarcity.

XitSam's picture

How many years now of silver market manipulation investigation?  CFTC couldn't piss their way out of a paper bag.

Unprepared's picture

Blankfein for Corzine? You mean like pleading the "Doing God's Work" amendement to the Untouchables Just Us Constitution?

"Your honor, I might be guilty but I'm an ex-Goldmanite if you see what I mean."

"Oh, ok then... case closed."

Kaiser Sousa's picture

Chilton is on CNBS as i type...and i qoute - 

"we thought it was important to bring this suit cause people need to know that the Government is looking out for them...."

im way pass ready to start killing these banker owned mother fucking cocksucker bastards................................

HedgeHammer's picture

That depends on your definition of the word "is" is.

 

CaptainObvious's picture

"we thought it was important to bring this suit cause people need to know that the Government is looking out for them...."

Correction..."We thought it was important to bring this suit cause we need to fill our own bank accounts with graft and the people need to know that the Government is looking at them while they call, type, drive, eat, and sleep."

Fuck them all.  Hard.  With cement dildos.

Hippocratic Oaf's picture

Jeez Cap, cement dildos?

Goddamn lost it on that one.

Bravo

Bay of Pigs's picture

Hey Bart, whatever happened to that 4 year old silver investigation?

This liar, shill and fraud deserves the firing squad as well.

 

DosZap's picture

Gosh!! how quaint, and they gave him plenty of time to move others assets into his little domain..........where were they a year ago?.

Sequitur's picture

"I did not have sex with that woman, Ms. Lewinsky."

- John Corzine

asscannon101's picture

"I was not a-doin' her, she was a-doin' ME!"
- Lil' Willy Clinton

mt paul's picture

i did...

she wasn't that much fun...

knukles's picture

"But I sure did fuck them people at MFG, bigtime. Booyah, motherfuckers"

hmmmstrange's picture

Presidential pardon.....

cougar_w's picture

... and there might be a place for him at The Fed.

Doubleguns's picture

and a beer. Maybe even a kiss later. 

ZerOhead's picture

Too late... the NSA utilizes key-stroke logging technologies.

And as a result Corzine, Gen. Alexander and now Obama's 'kill list' knows exactly what you called them...

cougar_w's picture

Are you kidding? Google crawls ZH every 15 seconds. Your deleted post will be searchable before you can get rid of it.

disabledvet's picture

i'm shocked! what else are those mad heathens up to!

mt paul's picture

google knows your comment

before you do ..