Did Interactive Brokers' CEO Commit Insider Trading By Buying 8 Million Shares Of MF Global Ahead Of Its Bankruptcy?
While certainly very much ironic, considering that his purchase is now completely worthless, the news that Interactive Brokers' CEO Thomas Peterffy, who up until the 11th hour was expected to be the buyer of the now liquidating exchange only to unwind the deal upon discovery of hundreds of millions in missing commingled funds, bought 8 million shares of MF Global stock for his own account is certain to raise many alarm flags at whatever disgraceful farce passes for US regulators these days. As a reminder, "the week before MF Global filed for bankruptcy on Oct. 31, the New York-based company’s shares fell 67 percent to $1.20. They have since dropped to 14 cents." So when did Peterffy start buying? "I started to buy the stock as it went down,” Peterffy, chief executive officer of Greenwich, Connecticut-based Interactive Brokers, said today in a phone interview. He said he still owns the shares. “You win a few, you lose a few."
True dat... the problem is that in this case you may well lose more than just 'a few' considering you were using your own cash to buy a stock knowing full well (and possibly in possession of material non-public info - in that case it is a clear cut case for the Feds) you would soon use the cash and possibly debt of your company as leverage to generate a massive personal return.
Granted, timing is an issue, and it all depends on just when Peterffy started accumulating. Which is why we will be closely watching to see at what prices and at what times the CEO dipped one toe, then another, then jumped head first. We also wonder just what comlipance process would allow him to buy the stock that the company would soon be looking into: even the most blind General Counsel must realize the optics of this revelation stink to high heaven. After all, it is precisley a variation of this theme that got David Sokol fired from Berkshire Hathaway..
More from Bloomberg:
Customers of MF Global, the holding company for the broker- dealer that was run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, have been able to transfer only a portion of their accounts to new brokers. The broker-dealer unit, MF Global Inc., faces liquidation. The lack of access to customer cash at MF Global is a “huge tragedy,” Peterffy said.
“It’s a horrible black spot on the futures industry,” he said. “The next time something like this happens, the positions should be immediately liquidated and the money distributed.”
Corzine, 64, increased risk-taking at MF Global as part of his strategy to re-make the futures broker into an investment bank, including $6.3 billion in European sovereign debt positions that roiled markets.
Discrepancies over missing customer funds used to back futures trades doomed a potential acquisition by Interactive Brokers, said Hans Stoll, an Interactive Brokers director and a professor of finance at Vanderbilt University in Nashville, Tennessee. The deal could have averted the bankruptcy filing.
“The board certainly considered that purchase and stepped away from it at a point where it became clear there were lots of uncertainties about the accounts and segregated funds,” Stoll said in a Nov. 1 interview.
So will the SEC investigate this, or will it be up to Egan Jones to force the company to disclose critical information needed for shareholders to make the right decision?
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