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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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Mon, 10/31/2011 - 23:52 | Link to Comment sbenard
sbenard's picture

This feels like Lehman Bros all over again!

"History doesn't repeat itself - at best it sometimes rhymes" - Mark Twain

"History is a gallery of pictures in which there are few originals and many copies." - Alexis de Tocqueville

Mon, 10/31/2011 - 23:55 | Link to Comment Outlaw Of The W...
Outlaw Of The Wasteland's picture

more like refco.

 

will be a footnote in the annals of jewish crime, at best.

Mon, 10/31/2011 - 23:53 | Link to Comment Dingleberry
Dingleberry's picture

How can anyone say we need less financial regualtions when we apparently don't have any at all now????  This fucker is a PRIMARY FED DEALER???  WHAT THE FUCK?!  How in the hell did no one notice 40-to-1 leverage and exposure to the fucking GREEKS?  How many other biggies are exposed? To what degree?  

Mon, 10/31/2011 - 23:55 | Link to Comment nothing can go wrogn
nothing can go wrogn's picture
MF Global Is First Big US Victim Of Europe Crisis

http://www.npr.org/templates/story/story.php?storyId=141892001

We need to have some sympathy here. MF Global and John Corzine are "victims".

Tue, 11/01/2011 - 00:22 | Link to Comment dolph9
dolph9's picture

Fucking propaganda.

You aren't going to win, Jews.  You only know how to shift money around, you can't produce a damn thing, you've bankrupted America, the oil is running out, the Arabs outnumber you 20 to 1, and nobody cares about your "holocaust" anymore.

Well done.

 

Tue, 11/01/2011 - 05:32 | Link to Comment Raging Debate
Raging Debate's picture

Seems there are plebes of all races upset about inflation: http://www.bbc.co.uk/news/world-middle-east-14777260

Lets smother all global rape victims once and for all! Sorry pal, six billion people all want in the Promised Land and symbolically speaking the gates are ripe for breaching. Evolution shall continue.

Tue, 11/01/2011 - 08:16 | Link to Comment Carlyle Groupie
Carlyle Groupie's picture

"We are the new Israelis, determined to continue the fight for a fairer and better society."

Yea right. More like:
"We are the scared Israelis witnessing the global awakening to our fraud and deception. The walls are closing in. Let's try this flavor of deception and see if they believe it."

Tue, 11/01/2011 - 00:15 | Link to Comment steelrules
steelrules's picture

And  Wall Street still can't understand why the retail investor hasn't come back.

They don't care how much money the FED dumps in to the markets. Like old GW said " fool me once shame on you"

http://www.youtube.com/watch?v=eKgPY1adc0A

Tue, 11/01/2011 - 10:52 | Link to Comment maddogs
maddogs's picture

With this latest offeriing coming out where more CDSs are being offered to re-re-insure Greek debts, I think people are going to come to understand, giving money a second time to the same institutes that, sold the Bond, get to keep the insurance premium the first time, will likely keep the second CDS "premium.. and never pay out. CDSs are now just another losing proposition, another hole to throw capitol into that the Banks will say, thanks aaannnd POFF, it's Gone! Wholesale and retail will abandon the debt on debt scheme.. there will be no money in it, except for the Banks.

Tue, 11/01/2011 - 00:21 | Link to Comment Civil Shepard
Civil Shepard's picture

Outlaw, you have been repeatedly warned.  STFU about anti-semetic b/s.  Now!  Don't mess with the Civil Shepard.

Tue, 11/01/2011 - 00:26 | Link to Comment Outlaw Of The W...
Outlaw Of The Wasteland's picture

"jews" aren't semetic (sic).  At all.

Tue, 11/01/2011 - 00:07 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Time to bring to bear the whole social media - public intelligence services.

If the whole OWS thing misses MF Global, then it is all a complete democratic hoodwink co-intel program to corral the angry masses.

A new game for the People is; Where in the World is Jon Corzine?

The whereabouts of this prime financial suspect need to be tracked 24/7.

Is Corzine at home?  Grand Cayman? The White House?

The 99% want to know (along with the FBI - if they are allowed to do their jobs.)

 

Tue, 11/01/2011 - 00:15 | Link to Comment user2011
user2011's picture

two words... executive pardon...   These fat cats will get away, anything... anything given they sign some checks during election campaign.

 

Tue, 11/01/2011 - 00:30 | Link to Comment Cabreado
Cabreado's picture

I think we've just about hit the top of that curve.

They are at the end of their game, those criminals who you politely call "fat cats."
There are fat cats, and then there are Sociopaths who commit crimes.
Concentrate on the latter. 

Tue, 11/01/2011 - 00:17 | Link to Comment Anonymouse
Anonymouse's picture

Sounds like they are entitled to treble damages for the fraudulent acts, and Corzine as Chmn/CEO would be liable.

 

Also, as a breach of fiduciary duty , MF would be presumed guilty, would they not?  I assume that would flow through to directors.  Seems to me Corzine's bank account may get drained faster than those of his clients.

 

Yeah, right.  As Ben Grimm used to say "It's Wrist-Slapping Time!"

Tue, 11/01/2011 - 00:17 | Link to Comment El Gordo
El Gordo's picture

Will it be the janitor or the head chef who winds up taking the fall and is frog marched off to jai?

Tue, 11/01/2011 - 00:21 | Link to Comment digalert
digalert's picture
"Someone Is Going To Jail For This"

You ZH folks crack me up. C'mon, jail for a few hundred million? What a knee slapper. Jail is for the serfs, not the banksters.

 

 

Tue, 11/01/2011 - 01:01 | Link to Comment whaletail
whaletail's picture

Whoever junked you can't face reality. You can jack foo's with impunity...if you steal enough. Just don't steal too little. Then the law will come down on you.

Tue, 11/01/2011 - 00:22 | Link to Comment bugs_
bugs_'s picture

Corzine (D) MFer's

Tue, 11/01/2011 - 00:31 | Link to Comment Illustro
Illustro's picture

MF Global employees do not think that Greece will default. Here is what the employees thought 3 weeks ago.

 

http://www.youtube.com/watch?v=CFM_C9O5wwQ&feature=channel_video_title

Tue, 11/01/2011 - 00:54 | Link to Comment caerus
caerus's picture

there will be a violation of the august neck at 1245ish GMCR is a decent short through earnings on the 9th...

i stand by my inebriated statement...gmcr to 40

Tue, 11/01/2011 - 00:45 | Link to Comment whaletail
whaletail's picture

To answer all those "what would you do" scenarios in the opening paragraph...I would give the following response, which works every now-and-then: "I was just following orders"

Tue, 11/01/2011 - 00:44 | Link to Comment Lone Deranger
Lone Deranger's picture

Well, it looks like they're already naming their first two victims to be burned at the stake:  "Henri Steenkamp" and "John Stockman" .  They are (were) the young rising stars who were promoted to CFO and Chief Risk Officer by Corzine.  Here's the story:

http://dealbook.nytimes.com/2011/10/31/at-mf-global-two-other-falling-stars/

Tue, 11/01/2011 - 01:07 | Link to Comment Lone Deranger
Lone Deranger's picture

For some odd reason, MF Global fired 15 employees (out of 53 total) in their Tokyo branch just before filing bankruptcy.  It's also interesting to note that the filing of the bankruptcy is almost moments before the Japanese Central Bank intervened.  I'm not a conspiricy theorist, but this is pretty odd in my book...

http://www.bloomberg.com/news/2011-11-01/mf-global-fired-15-japan-workers-before-bankruptcy-union-secretary-says.html

Tue, 11/01/2011 - 02:52 | Link to Comment Freddie
Freddie's picture

NY Slimes?  Ahhh...yup the two fall guys emerge.   No way.  This is Corzine's baby.  You don't grab $700 million trying to save a bad mega bet trade supposedly initiated by Corzine.

http://www.nypost.com/p/news/business/political_suicide_qCVtUTzdyDpn6Ndsb070zM

 

Tue, 11/01/2011 - 00:47 | Link to Comment Conax
Conax's picture

With my permanent PM goggles on, I saw this part and grinned.

"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."

Ah, very bullish. Take that, you bastards.

Tue, 11/01/2011 - 00:49 | Link to Comment whaletail
whaletail's picture

This is now in Obama's wheelhouse. Take out a big fish, and run with it into 2012. This smells.

Tue, 11/01/2011 - 00:56 | Link to Comment squexx
squexx's picture

My bet is that if you could trace the funds transfers, they'd end up in Tel Aviv. It's the new money laundering capital of the world.

Tue, 11/01/2011 - 01:14 | Link to Comment awkward squad
awkward squad's picture

Same thing with the organ-transplant and human trafficking industries. Wherever there's suffering and exploitation, you'll find my brother jews busily working away at the coal-face. It's what we do, y'know?

Tue, 11/01/2011 - 01:01 | Link to Comment ItsDanger
ItsDanger's picture

Your previous article alluded to the fact what could be worse than a bankruptcy, now you know, fraud & prison time.  There goes that golden partachute.  Just fools gold now.

Tue, 11/01/2011 - 01:06 | Link to Comment lolmaster
lolmaster's picture

MF is peanuts, anyone who had money with them had this coming. Look for stories of corzine making heroic all night calls and expect him to "fail up" ASAP.

Tue, 11/01/2011 - 01:06 | Link to Comment johngaltinvestments
johngaltinvestments's picture

How is this for precious:  "Probably the cardinal safeguard of both futures and securities customers’ funds required by the relevant provisions of the Commodity Exchange Act, the Securities Exchange Act of 1934 and the rules and regulations of the CFTC and the SEC is that they be segregated from the funds of the FCM/broker-dealer and may not be used to meet any obligations of the FCM/broker-dealer. A brief description of these provisions is set forth below."  Direct quote from MF Global site -- download this for laughs -- http://mfglobal.com/File%20Library/corp/pdf/Our%20Company/Client_Asset_P...

Tue, 11/01/2011 - 01:10 | Link to Comment philipat
philipat's picture

There is also a quaint little Law called Sarbanes-Oxley which, essentially, established that the CEO and CFO must sign off on, and therefore take responsibility for, the integrity of the financial statements. This law costs Companies billions of dollars annualy to comply with, so if it isn't going to be used for its intended purpose then please,for the love of God, get rid of the fucking thing?

Tue, 11/01/2011 - 01:29 | Link to Comment Milton Waddams
Milton Waddams's picture

"This law costs Companies billions of dollars annualy to comply with, so if it isn't going to be used for its intended purpose then please,for the love of God, get rid of the fucking thing?"

 

You answered your own question.  'Ya gots to pay for protection. Get it?'.

Tue, 11/01/2011 - 06:02 | Link to Comment Stormdancer
Stormdancer's picture

A little ironic that Corzine co-authored Sarbanes-Oxley during his stint as the US Senator from New Joysie...gonna be delightfully karmic if it does him in...

Tue, 11/01/2011 - 01:26 | Link to Comment HalinCA
HalinCA's picture

RIP legitimate capital markets.

Tue, 11/01/2011 - 01:33 | Link to Comment Milton Waddams
Milton Waddams's picture

Gotta love the 'above the fold' NYT conclusion:

 

"The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days."

 

Ah, okay.  No need to panic.  Just sloppy controls; the money has already started rolling back in and is expected to continue.  Phew!  Nothing to see here.  I think I'll click on the next article... damn, accidentally scrolled down instead.. what's that say?

 

"But the investigation, which is in its earliest stages, may uncover something more intentional and troubling."

 

Tue, 11/01/2011 - 02:56 | Link to Comment Freddie
Freddie's picture

It is the NY Slimes creating a cover story for Corzine.  The money will trickle in (the client money that was looted).  Trickle in from the Fed or Treasury Dept.

Tue, 11/01/2011 - 01:34 | Link to Comment wisefool
wisefool's picture

There is so much good about this thread. We have TD and WB7 posting inline. But there is not enough talk about Timmay.

2.5% -> 97.5% Leverage means nothing compared to Timmays token taxes-> Bens Printing Press.

Let me know when they find the real killers. And we will make them IRS agents!

Tue, 11/01/2011 - 01:42 | Link to Comment daxtonbrown
daxtonbrown's picture

[What began as nearly $1 billion missing had dropped to less than $700 million by late Monday.]

Well then, it's not so bad after all. Why get our panties in a wad for less than a trillion in fraud?

Tue, 11/01/2011 - 01:52 | Link to Comment caerus
Tue, 11/01/2011 - 02:12 | Link to Comment Problem Is
Problem Is's picture

No One's Going to Jail Here

(Channel your inner Dick Fuld)

"Shit! Walter, you fuck... you fucked it up! You fucked it up!"


"Nothing is fucked here, Dude. Come on, you're being very un-Dude. They'll call back."

Tue, 11/01/2011 - 02:14 | Link to Comment Troy Ounce
Troy Ounce's picture

 

 

 

The question mark at the end of the head line of this post say it all.

Tue, 11/01/2011 - 02:23 | Link to Comment Use of Weapons
Use of Weapons's picture

Rick Perry implodes whilst making fun of gold bugs, totally high / drunk / self-destructive doing it.

 

http://www.youtube.com/watch?&v=YSJv-2qfDNc

 

 

Not sure what happened there, but I'm guessing his campaign is toast.

Tue, 11/01/2011 - 02:33 | Link to Comment Problem Is
Problem Is's picture

Dick Perry... Bitch should come with a laugh track...

Tue, 11/01/2011 - 06:37 | Link to Comment wisefool
wisefool's picture

Again, I think Perry is more accurate in what he said there than Timmay has been thoughout his public service career. Including exclusives with Leisman on CNBC.

"Greece has a 0% chance of defaulting depending on what your definition of "default" is."

- SecTres, uses TurboTax. HR&R Block is too pricey for a Fed Govenor.

Tue, 11/01/2011 - 02:33 | Link to Comment caerus
caerus's picture

happy halloween bitchez!

floyd 2001

Tue, 11/01/2011 - 02:48 | Link to Comment mccoyspace
mccoyspace's picture

Here's something I've always wondered, maybe someone here knows:

If you have shorted a stock and then that stock is halted, never to return, what happens?

You never have to return the shares, keep the money for free?

 

Tue, 11/01/2011 - 03:37 | Link to Comment Ponziconomy
Ponziconomy's picture

Hey- it's hard to figure, eh? The REFCO remaike under a dirty NJ politico blows sky high and cash is missing. If you trade futures, get away from these multi-faceted bankster houses. Go to a place where the owner and most of the employees go to church on Sunday. I've been at a place for the last nearly 15 years where there will be no fraud or hyginks. The oldest continuously clearing member of tje CME. Go there and be safe. Forget the Street. Find old Chicago and let the real guys clear your business. Run from the giant houses that have the ability to steal through accounting shennanigans. It's only a dirty business when dirt bags get involved. Doesn't have to be that way. 

Tue, 11/01/2011 - 04:10 | Link to Comment tim73
tim73's picture

Let me guess...one guy will get 5000 year sentence, about one hundred lawyers will get rich, 9999 other bad guys will go free and Americans feel so happy happy.

3rd world "justice" system at work...or maybe it is 4th world, many 3rd world justice systems are actually better nowadays.

Tue, 11/01/2011 - 04:30 | Link to Comment ak_khanna
ak_khanna's picture

The most likely outcome of this would be that the Jon Corzine, the ex Goldman Sachs guy, will be fined a few million dollars for the crime in which he made billions of dollars of profit, without admitting to any wrongdoing­­­. There are two set of rules in today's democratic world, one for those who can buy the politicians and one set for the rest of the population.


The too big to fail bunch of politician purchasing banksters can get away with murder, fraud, coercian, harrassmen­­­­­­t of the general public and any other illegal activity under the sun because they have a lot of influence on the political class, the rule makers and the rule enforcers. So irrespecti­­­­­­ve of the position in the government­­­­­­, everyone works for their benefit. 

http://www­.marketora­cle.co.uk/­Article245­81.html

Tue, 11/01/2011 - 04:48 | Link to Comment Pondmaster
Pondmaster's picture

STOP THE LOOTING AND START PROSECUTING - OAKLAND AND DENVER POLICE COULD HELP US HERE . OOPS, MISSED A PROTESTOR AND HIT A BANKSTER .. OOPS !!

Tue, 11/01/2011 - 05:25 | Link to Comment Christoph830
Christoph830's picture

Classic gambler's fallacy. Thinking one can "make it back" if just given one more lifeline. Pathetic.

Tue, 11/01/2011 - 06:06 | Link to Comment Sandy15
Sandy15's picture

Progressive crony capitalist.  These political cheating morons is what gives a capitalist a bad name.  The protestors on Wall street vote for these morons, Corizine......Pelosi.......Obama........ then want to march against these guys as they vote for them again.   Move over Madoff, Corizine will be sharing a cell with you.

Tue, 11/01/2011 - 06:19 | Link to Comment MFL8240
MFL8240's picture

Jail is not the answer.  If we have one public hanging these fuckin rats will leave America on their own.

Tue, 11/01/2011 - 06:34 | Link to Comment spankfish
spankfish's picture

Corizine is the new Madoff, so we go from saying " you just got Madoffed to saying you just got Corzined".  Just checked my inbox email acccount, nothing from Eric Holder yet on the criminal prosecutions.  Lag time I guess... that who flux thinge'.

Sat, 11/05/2011 - 22:59 | Link to Comment ToNYC
ToNYC's picture

 

You shoul;d know that Eric Holder's  middle name is "Place".

Tue, 11/01/2011 - 06:49 | Link to Comment Trad3er_1337
Trad3er_1337's picture

****SHOULD I BE NERVOUS?**** Just loged into my brokers trading platform and...

 

Optimum Protection For Your Funds

As a client with IG Markets, you can be assured that your funds are safe with us:

  • All of your funds are safely held in a separate regulated trust account at a top-tier Australian bank
  • IG Markets also segregates your net running unrealised profits
  • IG Markets use its own money for hedging purposes
  • IG Markets has large cash reserves and sophisticated risk management systems

Many traders have been questioning whether their funds are secure with other CFD providers. We pride ourselves on our strength and security. Compare us with other CFD providers, and see why we are Australia’s No. 1 CFD Provider*.

Tue, 11/01/2011 - 07:15 | Link to Comment jcaz
jcaz's picture

LOL- that's funny!   Never too early after a crisis to market!   Does kinda raise questions for me, tho-  how much- EXACTLY- is "IG Markets has large cash reserves and sophisticated risk management systems"?

Tue, 11/01/2011 - 07:34 | Link to Comment Trad3er_1337
Trad3er_1337's picture

Yeah, must be alot of worried people out there for them to send an automated message to all their their clients like that... For me when someone tells me "EVERYTHING IS FINE" WHEN I NEVER ASKED it dose make me a little nervous... did mf start a run on the brokers??

Tue, 11/01/2011 - 06:49 | Link to Comment Trad3er_1337
Trad3er_1337's picture

****SHOULD I BE NERVOUS?**** Just loged into my brokers trading platform and...

 

Optimum Protection For Your Funds

As a client with IG Markets, you can be assured that your funds are safe with us:

  • All of your funds are safely held in a separate regulated trust account at a top-tier Australian bank
  • IG Markets also segregates your net running unrealised profits
  • IG Markets use its own money for hedging purposes
  • IG Markets has large cash reserves and sophisticated risk management systems

Many traders have been questioning whether their funds are secure with other CFD providers. We pride ourselves on our strength and security. Compare us with other CFD providers, and see why we are Australia’s No. 1 CFD Provider*.

Tue, 11/01/2011 - 08:24 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

Can't help but wonder if this cascading-collapse-in-the-making might be the runup to 401k confiscation.

Huge EFSF failures and MF Global bankruptcy in the past 24 hrs, ECB holding the line, Fed holding the line.   Something big is brewing here.

Tue, 11/01/2011 - 09:37 | Link to Comment mberry8870
mberry8870's picture

Classical intersection of politics and money. Corzine former Goldman dick, former Senator, former Governor. Stole customer money. If he isn't in jail........... this is worse that Fiedman.

 

We will see

Tue, 11/01/2011 - 09:50 | Link to Comment topshelfstuff
topshelfstuff's picture

In case this wasn't posted already, I'll pass it along, as requested. Paste Below:

There ARE NOT WORDS in the English or Greek languages to describe how illegal this is.
==================================
http://barnhardt.biz/

Scoop for a journalist! MF Global Inflated Margins Posted by Ann Barnhardt - October 31, AD 2011 7:05 PM MST

Um, Journalists? ZeroHedge people? Mr. Denninger? Market-Ticker forum people? You might want to pick this up and triple check me on this.

Okay, the NY Times and Reuters are reporting the MF Global was tapping customer seg funds to prop up its proprietary positions, which is just about the biggest crime an FCM can commit, right? I saw in a ZeroHedge thread that back in April MF was charging initial margin requirements at 175% of the exchange. So, I decided to cruise on over to the MF Global website and pull up their latest margin requirement guide and compare that to my clearing firm's rates.

Ho-ho-ho. Johnny Corzine was charging massive overages on margin requirements relative to the Exchange's SPAN requirements. And guys, every SPAN margin that I am quoting below is the HIGHER SPEC MARGIN, not hedge. Um, now we know why. Some comparisons:

 

Corn: MF $3640 SPAN: $2365 = 53.9% overage
Soybeans: MF $5500 SPAN: $3375 = 63.0% overage
Wheat: MF: $3825 SPAN: $3040 = 25.8% overage
Unleaded Gas: MF: $11340 SPAN: $9115 = 24.4% overage
Crude Oil: MF: $9000 SPAN: $8100 = 11.1% overage
Live Cattle: MF: $3780 SPAN: $1620 = 133% overage
30-Year Bonds: MF: $5208 SPAN: $4185 = 24.4% overage

Note how the smaller ag contracts are more heavily inflated than the uber-competitive HUGE contracts like Crude Oil and Bonds.

 

Here are the two URLs I used:

MF Global's Margin Page (PULL THIS DOWN BEFORE THEY TAKE DOWN THE WEBSITE!)


Here is the URL for my clearing firm's margins:

http://www.efutures.com/traders/contract_specs.php 

 

Compare and contrast. It looks like MF massively inflated margin requirements so that Corzine could tap the overage between the Exchange's SPAN requirement and the MF Global requirement, and use that difference to prop up his proprietary trades.

There ARE NOT WORDS in the English or Greek languages to describe how illegal this is.

Someone please pick this up and run with it. PLEASE.

Tue, 11/01/2011 - 10:17 | Link to Comment topshelfstuff
topshelfstuff's picture

this was probably posted, not sure, so I'll  paste, I guess somebody/s have to used to take the coming and known Losing side of the Trade, so just place a Member in, and later pass the Loss on to The People, the Taxpayers...A.K.A. a Racket, Racketeers in suits and ties, on a mega-scale

 

http://barnhardt.biz/ 

Nutshelling the MF Global Collapse Posted by Ann Barnhardt - October 31, AD 2011 11:14 AM MST

Yes, I called it late last week and strongly urged MF customers to make a hasty exit stage right, but I absolutely did not see what happened this morning coming. This is utterly unprecedented. The Chicago Mercantile Exchange issued an email circular this morning (I received mine at 8:39 am MDT) stating that all MF Global positions were limited to LIQUIDATION ONLY and all MF employees and brokers and traders were banned from the floor of the exchange.

1. As I mentioned last week, MF Global came to its present form back in 2005 when the then-biggest clearing firm, Refco, imploded and was bought by EDF Man. The new, huge firm was then renamed MF Global. When Refco imploded in 2005, NOTHING like this happened. It was a relatively smooth transition, trading was not interrupted, and most of the Refco employees were absorbed into the new company. There was absolutely NO interruption of customer access to positions.

 

2. Shutting off access of customers to their floor brokers and limiting them to liquidation-only is UNPRECEDENTED. If a big account did not have multiple clearing relationships, the risk exposure this morning for those firms is terrifying to ponder. I did not see this coming. The whole industry is pretty much in shock.

 

3. Let's not forget that a whole lot of people have just lost their jobs. All of the MF clerks, back office staff, everyone who worked for MF on Friday is now unemployed this morning. Those people matter. John Corzine views them as meaningless economic units who exist only to serve him and advance his power and increase his personal wealth, but John Corzine is an evil sociopath who should be permanently removed from society and imprisoned for the rest of his life so that he can do no more damage. Fricking jackal.

 

4. Speaking of Corzine, more info is coming out in the bankruptcy filings. First, Corzine stands to reap a $12.1 million severance package / golden parachute per the bankruptcy filing. But that isn't the worst. Corzine was hired by MF less than two years ago. He promptly went about loading the company up on European bonds. That in and of itself is damning enough. Remember, Corzine is Goldman Sachs. He knew EXACTLY what was going on in Europe and he knew that European paper was junk. But guess which European countries he loaded up on? Greece, Portugal, Italy and Ireland. The four little PIIGs. Corzine intentionally drove MF into the ground so that someone, and my money is on Goldman Sachs, could come in and buy the remains for 30 cents on the dollar or less. Watch the news. Watch and see who ends up buying the remnants of MF. If it isn't Goldman outright, I'll bet it is a "holding company" that is tied to Goldman. As an astute commenter over at ZeroHedge.com said last night, it looks like Corzine never really stopped working for Goldman. He just moved his office into MF Global's suite.

 

5. And now, ONE MORE TIME regarding the financial industry regulators in this country.

Guys, they are evil, corrupt and incompetent. The regulatory bodies are run by evil, evil people at the top who are complicit in these goings-on. There is NO POSSIBLE WAY that MF Global could have passed any honest audit with the amount of exposure it was carrying in the European bond market. By the way, MF Global's audit would have fallen under the jurisdiction and oversight of the Chicago Mercantile Exchange itself AND the Commodity Futures Trading Commission on the Federal level.

It is just impossible that the CME and the CFTC didn't know MF's position and risk exposure all along. The second tier in these regulatory agencies are a combination of evil, greedy and incompetent bureaucrats who could very well be classified as "useful idiots" who will do anything, say anything, or overlook anything just so long as their salary check clears the bank every month. The third tier are full-blown useful idiots - and by that I mean totally, completely and astoundingly unqualified and incompetent "foot soldiers", many of whom are affirmative action hires. When things like this happen (and there are other examples of massive ponzi schemes being ignored in recent history, like the Sentinel Management Group fiasco) what these regulatory bodies do is lay the blame for "missing" the red flags at the foot of the affirmative action hires who are the on-site auditors and who are made to sign off on the audits. Do you see this? Do you see the evil we are dealing with here?

 

6. And now here is a paragraph that everyone in the financial industry, but most particularly the futures industry, should send viral. Every Introducing Broker and Futures Commission Merchant in the world is being targeted for extinction by the megabanks. They want you GONE. Goldman, Citi, JP Morgan, etc. They are working with and through the financial regulatory bodies and with the Federal Government via such legislation as Dodd-Frank to force out of business every FCM and fold all of that business into the megabanks. IBs like me are also a target, but we IBs are meaningless guppies compared to whale-sized FCMs.


Corzine was SENT into MF Global with the objective of collapsing it and rolling the remains into Goldman (presumably). And he was paid eight figures to do it, AND promised SEC TREAS after Geithner. If you had said six months ago that the largest FCM in the U.S. would be taken down, everyone would have laughed in your face, but here we sit. The only question is, who is next? How long will an FCM like ADM last before looking at Dodd-Frank and saying, "Screw this. We're selling our clearing operations and we'll just go back to straight-up product merchandizing." Why shouldn't they? If the FCM profit center is made impossible by the government and the corrupt regulatory bodies, why would they continue to operate an FCM? Why not sell to Goldman or one of the other megabank entites and then do their exchange-traded hedge business through them as a customer? When will the old Chicago boutique firms be similarly forced out, either through regulation that makes their business impossible, or through outright sabotage as with Corzine and MF? None of you FCMs are safe. THEY WILL COME AFTER YOU AT SOME POINT. You have been targeted for extermination. Either you wake up to this fact and expose these regulatory bodies, megabanks and the Federal Government and fight them, or you are going to end up like MF, being bought by Goldman or one of the other fascist government-connected megabanks for pennies on the dollar. You have been warned.


7. This MF Global collapse is a small-scale (yes, that's right, SMALL-SCALE) foretaste of what is going to happen to the entire system. When I say get your money out of the market, out of paper instruments, and turn it into something real that is physically located on your property, that you can then stand in front of with an assault rifle and physically defend, I'M NOT KIDDING.


**Just for the sake of clarity, I clear exclusively through Penson right now. I have previously cleared RCG, and worked in an RJO branch office which RJO purchased from LFG in 2000, before starting my IB in 2006. That is the extent of my FCM relationship history.

 

 

Tue, 11/01/2011 - 10:45 | Link to Comment maddogs
maddogs's picture

Go to jail?/// as if!!! lololol, in 2 weeks we will find out it was all "legal".

Tue, 11/01/2011 - 13:09 | Link to Comment madgreek
madgreek's picture

What MF did was engage in "parking".

The only difference here is that "stock" wasn't used as the investment media.

The definition is basically, transferring (stock) positions to another party so that true ownership of the (stock) sill be hidden.

Parking is illegal as it is used deceptively. For example: an investor (MF Global) involved in the ownership of securities that are dropping precipitously in value and somehow arranges to dump these securities or lay off the risk so that the Regulators, Bank examiners, Auditors, and the Federal Reserve Bank will not know the extent of the investor's losses. Parking for this purpose is illegal.  

Tue, 11/01/2011 - 13:09 | Link to Comment madgreek
madgreek's picture

What MF did was engage in "parking".

The only difference here is that "stock" wasn't used as the investment media.

The definition is basically, transferring (stock) positions to another party so that true ownership of the (stock) sill be hidden.

Parking is illegal as it is used deceptively. For example: an investor (MF Global) involved in the ownership of securities that are dropping precipitously in value and somehow arranges to dump these securities or lay off the risk so that the Regulators, Bank examiners, Auditors, and the Federal Reserve Bank will not know the extent of the investor's losses. Parking for this purpose is illegal.  

Tue, 11/29/2011 - 19:25 | Link to Comment Ron Hera
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