Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?

Tyler Durden's picture

Say you are the head back office guy at MF Global, it is the close of trading on Thursday, the firm has already completely drawn down on its revolver, and all the resulting cash in addition to all the firm's cash at your disposal in affiliated bank accounts, up to and including petty cash, has been used to satisfy margin demands due to declining collateral value, yet the collateral calls just won't stop, and impatient voices on the other side of the phone line demand you transfer even more cash over immediately or else risk default proceedings commenced against you within minutes. What do you do? Do you go ahead and tell your superior that the firm is broke even though the co-opted media is trumpeting every 5 minutes that "MF Global is fine", knowing full well you will be immediately fired for being the bearer of bad news, or do you assume that courtesy of your uber-boss being the former head of the Vampire Squid, and thanks to infinite moral hazard which after Lehman made sure nobody would ever fail ever again, that there is simply no way that you will be left without some miraculous rescue, if only you can last one more day, and as a result proceed to "commingle" some client funds with the firm's cash. It turns out that at MF Global you do the latter... over and over... until you have literally stolen hundreds of millions from the firm's client accounts in hopes that the miracle rescue will come on Friday... then over the weekend... and then you realize no miracle is coming, partly because your actions have been exposed, partly because miracles only exist in fairy tales. The next thing you know, your firm is bankrupt and hundreds of clients are about to learn that all their money is gone. Poof. This is not a fictional tale. This is precisely what very likely happened at MF Global in the past 72 hours. And someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.

The sad truth of just how low Wall Street has fallen comes to us courtesy of the New York Times:

Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.


The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.

As for the details:

What began as nearly $1 billion missing had dropped to less than $700 million by late Monday. It is unclear where the money went, and some money is expected to trickle in over the coming days as the firm sorts through the bankruptcy process, the people said.


But regulators are examining whether MF Global diverted some customer money to support its own trades as the firm teetered on the brink of collapse. If that was the case, it could violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money.

And just like in the Lehman collapse where tens if not hundreds of international prime brokerage hedge fund clients, due to no fault of their own, found themselves insolvent after their cash ended up being caught at the London Lehman office (the details of how that money was illegally transferred from London to the US is a different topic entirely) and never to be seen again except to satisfy general unsecured claims, so thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is every to be seen again at all.

So who can be sued? Who can be blamed for this malicious and purposeful criminal act? Why everyone from the back office clerk presented in the thought experiment above, all the way up to the man at the very top, Jon himself, who, like in every other act of Wall Street impropriety will plead stupidity and deny he ever knew of this crime. Unfortunately, our criminal regulators, who will be just as complicit in clearing him of all wrongdoing, will aid and abet this latest destruction of faith in US capitalism.

What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfect solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008.

And that, dear reader, is called unintended consequences, and how the bankruptcy of a small exchange can avalanche into a crippling Ice Nine of what is left of capital markets all over again, courtesy of crony capitalism, rampant criminality and a regulator and enforcement body that is more fascinated with midget porn than any regulating or enforcing of the very firms it hopes to get an assistant general counsel job from in a few short years.

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knukles's picture

Note the comment, that intermingling the two pools of funds would "violate a fundamental tenet of Wall Street regulation: Customers’ money must be kept separate from company money."

Fuckin'-A right.  They Must Remain Separate.  The Customer Money is there to be churned. looted, misapproriated, violated and stolen.  The Firm's Money must be preserved at all costs for it is thence from where salaries and boni grow.

Fuckin'-A Right.
Prime Directive.

Freddie's picture

Uh yeah but this assumes you live in a country of laws.  America is Kenya and Zimbabwe now.

earleflorida's picture

it never was when we had a middle class that knew where their roots came from -

it seems in the last 30/ 40 years, they have been put on the 'endangered species list'

Freddie's picture

One word - TV.  Conservatives think Fox/Al Waleed is any better than Disney/ABC/Al Waleed or CNN/Time Warner/Al Waleed or NBC/GE/Comcast/Al Waleed.  The Saudis and the tribe have money and joint ventures with all the networks.  Sheep who watch TV enable it ALL.

Oh regional Indian's picture

Spot on Freddie. TV and the bought up press...


On the Press



disabledvet's picture

and then it's...ON TO THE TAXPAYER!

CrashisOptimistic's picture



It's the SIPC.

Guess who has to replace the customer money?  It's the securities agency's FDIC clone.

Bobbyrib's picture

SIPC is not the government. Not saying you did say it, but it needs to be pointed out.

Freewheelin Franklin's picture

I thought the SPIC was broke after that Madoff thingy.

Pladizow's picture

How did the latinos get involved?

earleflorida's picture




MFL8240's picture

Obama had Corizide on a short list of candidates to replace Tim the tax cheat.  Two things, Obama must go and Geithner should be in jail with Corizide. 

WestVillageIdiot's picture

Corzine was on a short list and Obama belongs on a short bus.  I could still see him coming to Corzine's defense.  That's what human fecal matter does. 

Cynical Sidney's picture

obama and the fed is on corzine's short list of people to call when corzine got the margin call. Due to the hostile political climate i guess they are not very receptive to corzine's ideas. obama is readying the next round of bankster bailouts, they will be consolidated into one huge bailout. mark my words next one will be big

Freewheelin Franklin's picture

I don't know. Corzine lobbied hard for that position and Obummer basically blew him off. That was the impression I got at the time.

WestVillageIdiot's picture

When you say "blew him off".........................?

Hedgetard55's picture

I hear Barry is the blowee, not the blower.

Spitzer's picture

I said months ago that Eurozone shit would cause Fed primary dealers to go bankrupt.  Its on record.

MF down..

WestVillageIdiot's picture

Spitzer, I know you are the biggest fan of the Euro on ZH.  I don't mean that as an insult.  So how does this help the Euro?  How well do you think the Euro can do, in lieu of the news of a Greek referendum?  I can tell you that you know this a lot better than I do.  I always appreciate seeing your opinioin. 

Bringin It's picture

Spitzer must be OK or they would not have done that DSK-deal on him.

Re. the Euro - Jim Willie talked along time ago about a rump/remanent/Nordic Euro.

Greece needs to return to the Drachma.  The "Latin Euro" is DOA and that leaves the remaining rump/remanent/Nordic Euro that Jim Willie talked about a long time ago.

Spitzer's picture

I don't really know how this will play out but the fact is, Eurozone issues brought down a Fed primary dealer bank. What if the EU problems bring down another bigger primary dealer bank ? And then the specs turn to the US ?

Ahmeexnal's picture

and this in turn means Fed won't bail out deadbeat eurozone.  collapse wll happen on both sides of the atlantic. the difference is, on the other side they will blame a neighboring euro country and go to war.  history is ALWAYS right.

Pure Evil's picture

I think they just did a partial bailout of the eurozone with the vast majority of MF Global's deposits.

The whole scheme was designed to fail, why else put Corzine in charge.

I'm not sure which hurts worse, gettin' ass raped by your ex-wife's lawyer, or being ass raped by Jon Corzine and MF Global.

disabledvet's picture

my guess would be a "totally insane Trichet" was not factored into equation. Once he said "non" to the CDS--that was the end of MFGlobal. Soon we will be adding major European banks to the list.

Bringin It's picture

Re. why else put Corzine in charge?


Good point PureEvil.  It's like lighting a back fire to slow down the fire-storm.

Raging Debate's picture

Spitzer - You also called the Euro peg correctly as well, even though its just a bridge for the Chinese peg. Well called sir.

dolph9's picture

Show me one Jewish bankster who has gone to jail.

WestVillageIdiot's picture

Madoff?  Is he considered a banker? 

disabledvet's picture

well he was a regulator. isn't that considered "the next best thing"?

optionswriter's picture

Maybe I missed something,  But I thought Corzine was Italian.

XitSam's picture

Maybe I missed something. There are no jews in Italy?

Ahmeexnal's picture

Michaelangelo and Leonardo da Vinci are the first ones that comes to mind.

dolph9's picture

They were creative and noble, the exact opposite of Jews.

myshadow's picture

well he isn't part of the international zionist conspiracy.....

Personal details Born Jon Stevens Corzine
January 1, 1947 (age 64)
Taylorville, Illinois Political party Democratic Spouse(s) Joanne Dougherty Corzine (1969–2003; divorced)
Sharon Elghanayan (2010–current) Children Jennifer Corzine
Josh Corzine
Jeffrey Corzine Residence Hoboken, New Jersey Alma mater University of Illinois (B.A.)
University of Chicago Booth School of Business (M.B.A.) Profession Financial executive, jail bird
Religion United Church of Christ[1] Signature
CompassionateFascist's picture

He can claim any "religion" he wants. I personally worship Mithras...but that has nothing to do with my ethnicity (race). Ditto Corzine. In other words, HE'S A FUCKIN' HEEB!

TrulyBelieving's picture

You said bankster, as if you meant a Jewish criminal. If that's the case I agree with you. If you mean any Jewish banker just because he is Jewish, then I wouldn't agree.  Would you be so kind to clarify your meaning, please sir.

CompassionateFascist's picture

Stavisky, in France...about 75 years ago.

No One's picture

Jail!!! HAHAHAHAHAH thats funny...

Dudes who did this (if true) will end up at SEC

WestVillageIdiot's picture

If Corzine was Hindu he would be truly fucked.  I think O and Holder hate the Hindus.  Just ask Raj. 

Freddie's picture

O's a muslim.  He was a CIA cutout in Pakistan years ago.

navy62802's picture

This is why I call black swan on MF Global. This is going to grow larger.

MsCreant's picture


It is going to take a real surprise to get around the Bernanke, TPPT, the TBTFs, and the rest of the central banking system. There is too much central banker control propping stuff up.

chdwlch1's picture

I was sure they were going to hold this thing together (bubble gum, duct tape, etc.) until the I'm not so sure.

midgetrannyporn's picture

This is going to grow larger.


That's what she said.

disabledvet's picture

you know in the old days you really did go "from the revolver to the revolver." it really was that simple. now we need a Karl Gustav i guess.