Second MF Global Unveiled As Canadian Regulator Accuses Barret Capital Of Commingling Client Funds

Tyler Durden's picture

When we learned of the MF Global client theft scandal, in the aftermath of its sudden bankruptcy filing, the one thing we predicted would happen (in addition to Jon Corzine never going to prison) was that many more brokers, banks and broadly financial intermediaries would be discovered having dipped in client accounts, or otherwise "commingled" capital in direct violation of the first rule of banking. Sure enough, a little over two months since, the second notable company to have been alleged to have abused client capital for own purposes has emerged. And it comes to us courtesy of sleep Canada whose "banks are all fine." As the Winnipeg Free Press reports, "One of Canada's investment regulators has accused Barret Capital Management, a firm specialized in futures and options on metals and other exchange-traded commodities, of using client money for its own purposes. The Investment Industry Regulatory Organization of Canada warned Monday that Barret clients are at risk due to the firm's "ongoing misappropriation of their money to fund losing trades and ongoing misinformation about the value and holdings in their accounts." IIROC has set a hearing for Tuesday morning to suspend Barret's membership in the organization and stop Barret from dealing with the public. In requesting the expedited hearing, the regulator alleged Barret made "significant misrepresentations to clients including through manipulating account values, misrepresenting account values and holdings by way of false account statements or otherwise providing false information to clients and by manipulating on and off book payments to clients." Where the story gets even more interesting is when one takes a look at just what it is that the company engages in, and how it fits into the scenario analysis conducted in the MF Global aftermath.

From the company's blog, which has all about 5 entries:

Barret Capital is an Investment Dealer that specializes in futures and options on metals, energies and all other Exchange-traded commodities, located in Toronto Ontario.

And the website's About Us section:

Dedicated to guiding commodity investors in Canada to safer, more focused investments in hard assets like gold and silver


Buying hard assets like gold and silver will protect you from the instability of today's market place. As a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investors Protection Fund, we are a full service boutique firm dedicated to guiding novice and experienced commodity investors in Canada towards smart investments, including buying and selling gold, silver and other hard assets.


Our expert brokers, staff and management will guide you from beginning to end, ensuring that you become an educated commodities trader who makes more profitable trades in the exploding gold, silver and commodities market.


We offer our commodity investors in Canada the following services:


    Buying and selling gold, silver, and other commodities
    Buying in derivatives or hard assets
    Providing on-demand market quotes
    Offering delivery and storage options
    Placing stop-loss orders
    Offering online account views
    Providing regular research reports
    Consulting from bullion specialists
    Liquidating holdings


If you are a commodities investor in Canada, contact us today to learn more on how buying and selling gold and silver can help you profit from a booming commodities marketplace.

And finally, per the President's message, the fallout may next impact carrying broker Laurentian Bank:

At Barret Capital Management Inc., we pride ourselves in being a full service, commodities futures Investment Dealer located in the heart of Toronto, Ontario. The decision to choose Laurentian Bank Securities as our carrying broker was an integral one, as Barret Capital Management Inc. is able to provide its clients with the best of two worlds: personal attention to your financial objectives that you'd expect from a boutique commodities futures firm, along with the breadth of knowledge, information and integrity that a large carrying full service brokerage bank can provide.


Our Toronto commodities futures brokerage is special because we believe in building real relationships with our clients. At the end of the day, taking care of your individual interest is at the core of everything we do.

What all this means is that as expected MF Global may have been the first, but certainly will not be the last, to use client capital to prop up its books. And while Barret is not Goldman, it is merely the next company which could no longer perpetuate the lie. Of course, the bigger one is, the harder it is to be caught. Once caught, however, the ripple effects spread fast and furious. 

In Barret's case, this latest incursion in fiduciary duty will simply make paper investors even more skeptical of keeping precious metal "investments" in a paper intermediary, something we warned about when we discussed the fallout from MF Global on HSBC gold claims. Because those too are just the beginning.

Finally, while still unclear what the premise behind the regulatory allegation is, readers will recall our final warning that as in MF Global's case, the fundamental weakest link in the system, was the rehypothecation of assets to make funding appear sufficient and credible, when in reality it is nothing but hot air.  Specifically, we said: "Canadian banks, which as it also turns out, defended themselves against Zero Hedge allegations they may well be the next shoes to drop, as being strong and vibrant, yet which have all the same if not far greater risk factors as MF Global."

This was merely the first. We expect many more, Canadian, and otherwise banks, to follow suit, in a world in which broker funding is virtually nonexistent at this moment.

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rehypothecator's picture

Liqidating holdings is a service?  "We get you in at the top, we sell you out at the bottom.  No extra charge - just two commissions. That's all."  

Ahmeexnal's picture



So all the paper PM investors will instead pour their money into:

a) Treasuries

b) stock market

c) hookers and blow

strannick's picture

Barret Capital's big draw was that they let Canadians store their retirement RRSPs (401K equivilent) in physcial gold and silver. Like MF Global, they were heavily into precious metals trading. The idea was that Barret is the broker that buys the gold on your behalf and verifies the purchase with Revenue Canada, then stores the metal at Brinks.

Like GLD or Mf Global this seems to be another instance of paper gold buyers getting to hold the bag, but without any of the gold inside it.

GiantVampireSquid vs OWS UFC 2012's picture

It's how you get gold in the new abnormal.

strannick's picture

Why is Barret's feel good slogan so reminscent of 'change you can believe in' and 'yes we can'

Our Toronto commodities futures brokerage is special because we believe in building real relationships with our clients. At the end of the day, taking care of your individual interest is at the core of everything we do.

Seems he really meant 'taking possesion of your individual holdings is at the core of everything we do'


Bankster rapings know no borders. 

Popo's picture

My understanding, from talking to many friends in the business -- is that the reason that MF Global was not bailed out early-on is because the commingling of funds is absolutely rampant within the industry.    There isn't just one other MF Global -- there are literally hundreds.   The whole system is basically unregulated (despite appearances) and there is zero security for individual account holders.

This is the dirty secret which they want to hide -- and which will absolutely see the light of day very soon. 

"Your money" and "your account" are essentially meaningless concepts today.   Your deposits are being used as "their money" and they have put it at risk with enormous leverage for "their advantage".   

Another piece of evidence is that NONE of the major banks condemned MF Global's actions.   One would think that if MF Global was engaged in some freak transgression of accounts -- that the responsible players in the industry would step forward and condemn Corzine.   Did anyone see that happen?   No.  Because they're all doing exactly the same thing and they're silently watching to see what happens with MFG.  


(They're ALL commingling funds!)




Ann Barnhardt:   "These sums of money are so huge we are in the realm of mathematical impossibility.   You can't unwind this  ....   Even if you give the risk a 95% haircut,  you're talking about sums that exceed the GDP of the United States."

"MF Global was a trial balloon to see what they could get away with.  Sadly, what we have now seen is that the people are going to take this. ...  These customers are being raped.  The customer should have been at the front of the line.   These people were not "investing" with MF Global.  MFG was acting as a custodian of customer cash.  ... They've done this now and there are no torches and pitchforks."


Warren Pollock:   "With MF Global we are setting a precedent to allow grand scale theft of public funds to occur."

Michael's picture

Dr Ron Paul should give a speech in Florida, as he is not skipping the state, at South Beach.

What an epic seen that would be.

Oh regional Indian's picture

Accelerated revelation season. High scandals abound. No one to trust.

Since it will soon be proven that all "Capital" managers are criminal at one level or another, they will be given a blanket amnesty to re-tire on their own island. Not enough white-collar jails, anywhere.

And just so you all know where China is looking, odd marriages and all, see this little story...China owning the world by proxy.

Reliance Communications Ltd. (R-Com), the mobile telephony arm of the Anil Ambani-led Reliance Group, has tied up foreign debt to refinance the redemption of outstanding foreign currency convertible bonds (FCCB) issued by the company.


In a stock exchange filing, R-Com said that it had raised $1.18 billion from Industrial and Commercial Bank of China, China Development Bank and Export Import Bank of China and some “other banks” to refinance the FCCBs that are due for redemption on 1 March.


There you have it. Buy my Huawei, take my money.



Left Right Wrong's picture

Off Topic but was wondering if anyone had seen this and if aspects of it can be verified:

The American Federal Empire: Change it On The Horizon Part 2

Yes I recognize the intro and parts are very off the wall, but he ties together many events that I am familiar with in a way that is unique to me and worth at least a look into.  Unfortunately there isn't a nice index of references to each claim he makes.


Ghordius's picture

LOL - it starts with Benjamin Franklin defending the US fiat system of that time vs King George's gold backed money!

you won't make many friends with this link here

Oh regional Indian's picture

Once a high quality tin foil hat is on, nothign is off topic my friend. Not sure about the cloning thing, but the world as we think we know and the world as it is are quite different.

it's all about polishing one's BS meter to a good shine. Thanks for the share.



YBNguy's picture

Comingeling is so 2011. In 2012 its all about straight up theft.

NotApplicable's picture

All your capital are belong to us.

SomethingWicked's picture

Popo - Ann Barnhardt also keeps a copy of the Koran bookmarked with bacon; that is, the parts she hasn't set on fire.  The girl is a little. . . how do I say this. . . odd?

While I don't necessarily disagree with what she said in the Pollock interview, her YouTube video antics paint the picture of someone. . how shall I put it. . .lacking temperance.

Ralph Spoilsport's picture

I think the correct terms are "Poor Impulse Control" or the more widely used "Psycho Bitch".

Popo's picture

Something Wicked -- 

And I like my women under 44 kilos.  We all have our weird sides.  But when it comes to analyzing financial fraud I like to think I have it right.  As does Anne "Koran Burner" Barnhardt.

I'll double down on this one if I have to.  What she said is 100% accurate.



847328_3527's picture

Fraudsters Without Borders:

"Bankers and Brokers to provide urgent financial care in countries to sheeples of wealth regardless of race, religion, or politics."

nodhannum's picture

Change, as in we change you from being wealthy to being poor and "yes we can" as in yes we can and will fu_k you".  They believe in building real relationships with their "victims".  A rapist builds a real relationship with his victim...a terrifying relationship.  Say bye bye to your virtual gold and silver.

DoChenRollingBearing's picture

@ GiantVamSq

I get my gold the old-fashioned way: driving over to my coin shop and buying it!

The premiums I have lately paid over "paper gold" (spot price) have averaged some 5.5% over spot.

Here is the widget-tracker I use to track premiums over spot vs. spot gold (for a longer term project to help me identify stress in the retail physical gold market), note that I just started this so longer-term trends are not available:

This widget comes from eBay and and is found at's home page at the bottom.



GiantVampireSquid vs OWS UFC 2012's picture

I'm paying a 15% premium for silver, because I don't trust shops, after I started noticing a few articles about fake silver, some of the frauds look very good. 

DoChenRollingBearing's picture

I buy the American Silver Eagles, so far without a problem (I guess!) at about a 15% premium as well.  The ASEs would (perhaps) have the Secret Service tracking them down ("Legal Tender").  Yes, I did read a piece about very good fake Canadian 1 oz silver Maples.

I put much more $$$ into Gold Eagles.  For the moment, there are few/no news items about fake AGEs...


Here try this for PM premiums on eBay vs. spot:

Last above works OK for my premiums vs. spot prices of PMs!

HardwoodAg's picture

In/around the 06 time frame, tubed ASE's could often catch a bid on the bay for spot, and that was factoring in freight.

DosZap's picture


tubed ASE's could often catch a bid on the bay for spot, and that was factoring in freight.

At this time, I would not buy any silver or gold coins off the Bay.

There are far too many dupes now,damned asians are making some quality dupes,even lifetime dealers miss a few.

Only deal with a dealer that gets their inventory directly from the  mint.

OR, buy only older dated coins.(NOT semi Numis, or  Numi's)

Ignorance is bliss's picture

That's if you want the best return on your investment.

cossack55's picture

If they are paper bugs, they aren't smart enough to choose option C.

knukles's picture

I'll take the hooker for 1 hour, Alex

Dental Floss Tycoon's picture

"So all the paper PM investors will instead pour their money into:"

Some might even choose:

d) Physical

cnsteph's picture

Can someone tell me how to get my money out of my 401k?  I have a small loan on it already but after seeing all of this I want it all out to invest in, um.. other stuff. =p   I'm willing to take the tax hit but it seems they won't let me withdraw the money at all.  Any hints?

SomethingWicked's picture

Sure – Alton Brown’s quick and EZ recipe for getting money out of 401K:

1. Find new a job doing what you are doing now for more money.

2. Quit current job.

3. Take 10% + federal + state + local tax rape to get your money out of the retirement system.

4. Use your remaining $42.50 to buy a 1oz silver coin ($30 plus premium over spot , plus shipping / tax).

The only other alternative I can think of is to do the job switch and migrate the 401k into a Self-Directed 401K. In theory you can invest in real estate and PMs. The IRS loves disallowing Self-Directed retirement accounts, so dot your Ts and cross your eyes.

Please don't get 1 and 2 out of order. It messes up the whole recipe.

gwar5's picture

Sure -- and no tax hit. Set up a Self-Directed IRA and start moving money out of your 401K. It's a custodian-custodian transfer, so no penalties, etc. It's no different than moving an IRA from Fidelity to Scwhab. Some 401Ks limit how much you can move out at time to slow you down. Contact an outfit out there that does this, like, and follow the basic rules to avoid SNAFUs. 2-4 weeks to set up. They're used to working with virgins and will walk you through it.


From there they can also help you set up a LLC, which is highly desireable for maximum freedom, to be your investing vehicle to buy real estate, including foreign real estate, physical PMs, etc. The service still functions as the custodian and LLC owner of record, while you are the controlling LLC director who can open local bank accounts to conduct your business. You can then transfer money from the custodian to fund the LLC (as needed) to buy foreclosures, other businesses and LLCs, PMs, or open equity accounts, or whatever, as desired. Your investment opportunity is virtually unlimited. Your LLC may also develop intrinsic value of it's own and you can sell it as an ongoing concern later on, returning the profits back to the mothership custodian account to repeat the process; or you can also have more than one LLC at a time.

It's all on the up and up with reasonable fees for set up and maintainence, but shop it around to make sure before you lock in on one.

Again, follow the rules which are pretty basic. The essential ones are that you can't do self-dealings with personal or familial property; and you can't invest in stupid shit like baseball cards. IOW -- you can't use your IRA to payoff your underwater house to live in. However, I've heard of like-minded friends who used their self-directed LLCs to reciprocate and buy each others homes, no one relocates, but the monthly rent to each other offsets and nets zero. Get it?  Use your imagination, but follow the rules. 





DosZap's picture


Most funds/companies will allow withdrawals, but it's dependent on how long you have been there, and only allow you to remove YOUR out of pocket portions.

If they refuse to allow you to remove the lions share of YOUR deposits, I would try taking out as large a chunk as possible by adding it to you current loan,more if they will allow it, if not a second separate loan,IF allowed.

Your interest at least goes back to you.And you get the lions share IF they allow it.

Just a thought.

malek's picture

Do they really charge commission for "selling" stock that went to zero? Haven't had that experience yet...   /sarc

Gidas19's picture

A snitch mad about his bonuses capped at 125,000 ratted out this "commingling" bank... Oh wait wrong bank...

Vaiman's picture

They should be crucified for this crap.  Same with Corzine.  Keep your hands out of the cookie jar that has the clients money in it.  That's what happens when greed gets a hold.  It blinds people and ruins there judgement.  And then turns them into thieves and liars.  

Chief KnocAHoma's picture

A thought just hit me - is it possible that all these paper metal products are actually driving the prices UP? We've seen this phenomena before, like in real estate. When access was easy and loose, the asset prices went crazy.

Of course in the metal markets, there are true limitations on the availability, but think about this. Many people don't want to deal with physical. Too hard to store and makes you a target. So they trade paper. If this proven to be a bogus method, where will that demand go?


hyper-critical's picture

Oy gevault. Alea iacta est...

Mr Lennon Hendrix's picture

But nothing would happen like this in Canada!  Canada is so much better than every where else!

Ahmeexnal's picture

Too bad Canada's former president Obubba Clinton also repealed Glass-Steagal.

Vaiman's picture

It has nothing to do with Canada.  Thieves and Liars know no borders!

pods's picture

It has everything to do with Canada.  When Tyler had posted some information about the shape of Canadian banking he ruffled some serious feathers.  There were some staunch denials that Canada would allow such things. So this is a confirmation of that Canada is no different than anywhere else.


NotApplicable's picture

Now I'm no longer so sure of my tungsten holdings in CEF. Their prospectus sounds very similar to Barret's pitch.

Shit's pretty fucked up if even tungsten turns out to be nothing but paper promises.


DosZap's picture


When Tyler had posted some information about the shape of Canadian banking he ruffled some serious feathers.

Well, this is a minor salvo compared to the housing market, where the Canucks are going to recieve the same douche we have here,it will be MIND boggling for them.

Hansel's picture

Everybody's doing it.  They had no idea.  Priced In.  Bullish.  Sell PMs.  Etc.