MF Global

MF All-around (OTC Pink: MFGLQ), aforetime accepted as Man Financial, was a above all-around banking derivatives broker. MF All-around provided exchange-traded derivatives, such as futures and options as able-bodied as over-the-counter articles such as affairs for aberration (CFDs), adopted barter and advance betting. MF All-around was aswell a primary banker in United States Treasury securities.

MF All-around was the allowance articulation of Man Group until 2007, if the business absitively to breach the investment and allowance businesses so they could anniversary focus on their own markets. An IPO was done for the allowance business which was renamed MF All-around to analyze it from the investment business which remained as Man Group. The aggregation was registered in Bermuda, but after confused its allotment and address to the United States.2

On Sunday, October 30, 2011, a assemblage of the New York-based allowance aboriginal appear to the Chicago Mercantile Barter (CME) and the Commodity Futures Trading Commission (CFTC) a “material shortfall” of hundreds of millions of dollars in absolute chump funds. The CME letters that aboriginal on Monday, October 31, 2011, admiral of MF All-around accepted alteration of $700 actor from chump accounts to the broker-dealer and a accommodation of $175 actor in chump funds to MF Global’s U.K. accessory to awning or affectation clamminess shortfalls at the company. Chump accounts were arctic the aforementioned day and the ancestor company, MF All-around Inc., filed the eighth-largest U.S. bankruptcy. MF All-around appear the arrears in chump accounts at $891,465,650 as of abutting of business Friday, October 28, 2011.34 According to the trustee administering defalcation the arrears may be as ample as $1.6 billion.56 7MF All-around alloyed chump funds and acclimated them for its own annual for at atomic several canicule afore the defalcation and transferred funds alfresco the country.8

The allowance acclimated a ample amount of circuitous and arguable repurchase agreements or "repos" for allotment and for leveraging profit, abounding off their antithesis sheet.910 Some of these circuitous repos accept been declared as a wrong-way $6.3 billion barter MF All-around fabricated on its own account on bonds of some of Europe’s a lot of accountable nations. Abortion of the repo positions helped could cause the clamminess crisis at the firm.1112 The abrupt dematerialization of so abundant clamminess may announce a aspersion and crisis accompanying to the boundless convenance a part of US and UK brokers of rehypothecation of chump collateral.13 Rehypothecation is not accustomed in Canada and Canadian barter of MF All-around were able to balance all their funds aural 10 days.14

Some commentators accept appropriate the abortion of MF All-around highlights the adversity in acclimation circuitous all-around banking firms, the dangers of off-balance-sheet accounting as able-bodied affecting on the European absolute debt crisis

History

MF Global traces its roots to the amoroso trading business started by James Man in England in 1783, which acquired into broader bolt trading afore its afterwards transformation into a banking casework business during the 1980s.17 Its above parent, again accepted as ED&F Man, adapted from authentic banknote bolt into article futures in the backward 1970s, and accustomed the Anderson Man futures allowance in 1981. It afterwards afflicted its name to ED&F Man All-embracing and again Man Financial, afore adopting the accepted cast afterward the antecedent accessible alms (IPO) and break of the allowance from the asset administration operation. ED&F Man operated as a affiliation through to the 1970s, if it started an all-embracing amplification which, by 1983, added its agents 650 employees. ED&F Man listed on the London Banal Exchange in 1994, alteration its name to Man Accumulation in 2000. Its agronomical business, which retained the ED&F Man name, was awash to administration the aforementioned year.

The accelerated amplification of the Man Investments assemblage in the arising barrier armamentarium administration business buried abounding investors from the development of its allowance unit.Man Banking boarded on a alternation of acquisitions, which broadcast its artefact adequacy and geographic reach, starting in 1989 with the acquirement of the Chicago-based GNP Commodities, and including acclaimed industry names such as Geldermann, Tullett & Tokyo Futures, First American Discount Corp., Australia's Ord Minnett and GNI. The 2002 acquirement of GNI was the better of these and gave Man Banking admission to the again growing Contract for aberration bazaar and GNI's trading belvedere GNI touch.

However, in 2005 Man Banking fabricated its better accord with the transformative $323 actor accretion of applicant assets and accounts from entities of Refco, afterward the U.S. financial-services group's collapse in backward 2005. The Refco accord followed a hotly contested bargain with Cerberus Capital, the clandestine disinterestedness group, and additional Man Financial's calibration in retail and institutional business.18 In June 2007, Man Banking was spun off from Man Accumulation as a separate, accessible entity, via an IPO, and renamed MF Global.19

On February 28, 2008, MF Global appear a bad debt provision20 in the bulk of $141.5 million. The accouterment was the aftereffect of unauthorised trading by a adumbrative in a MF Global annex office, who on February 27, 2008, while trading in the aureate futures bazaar in his claimed account, essentially exceeded his accustomed trading limit. MF Global captivated a appointment call21 at 11 a.m. EST on February 28 to altercate the matter. MF Global was fined $10,000,000 by the CFTC over the adventure and an different Natural gas adventure from 2003.2223 The CME Accumulation aswell fined MF Global $495,000 over the aureate incident.24

On March 17, 2008, shares of MF Global plummeted on clamminess fears.25 The CME,26 ICE,27 Nymex28 and CFTC29 issued statements acknowledging MF Global was in acquiescence with authoritative and banking requirements.

In October 2008, above Chicago Lath of Trade CEO Bernard W. Dan30 became the CEO of MF Global, advertence that he would advance MF Global's accident management.19 In November 2009, MF Global confused its accumulated address from Bermuda to the United States.19 In March 2010, Jon Corzine, who had concluded his appellation as governor of New Jersey in January 2010 afterwards getting defeated by Republican amateur Chris Christie, became the CEO, replacing Dan.19

editBankruptcy protection

On October 25, 2011 MF Global appear a $191.6 actor annual accident as a aftereffect of trading on European government bonds. In acknowledgment Moody's and Fitch cut the company's acclaim rankings to junk. Corzine was alive to acquisition a buyer, according to several reports.31

The firm's lath met through the weekend of October 29/30 in New York to accede options including a auction to avoid failure, according to a getting with absolute ability of the situationcitation needed. It was chock-full from accomplishing new business with the New York Fed until it showed it was able to accomplish its responsibilities as a primary dealer, according to a account on the regulator's website. Trading in MF Global's banal was halted.

On Monday October 31, 2011, MF Global filed for Chapter 11 bankruptcy. KPMG is now administering the "Special Administration" for MF Global UK. The Wall Street Journal appear that MF Global would seek Chapter 11 defalcation aegis afterwards advance $6 billion in absolute bonds issued by European countries.3233 According to the CME Accumulation Inc., MF Global bankrupt rules on befitting chump money abstracted from its own trading accounts. On August 31, 2011 MF Global had $7.3 billion in chump assets, according to Article Futures Trading Commission data.3435 The MF Global defalcation was the better Wall Street close to collapse back the Lehman Brothers adventure in September 2008.36

In affidavit filed in U.S. Defalcation Court in Manhattan, MF Global listed debt of $39.7 billion and assets of $41 billion.

The U.S. Securities and Exchange Commission is aswell reviewing trades in MF Global Holdings Ltd. (MF) convertible bonds to actuate whether some investors awash the debt based on arcane advice afore the firm’s demise,.37

Days afterwards getting called to arch the analysis for Penn State advisers of the Penn State sex corruption scandal, above Federal Bureau of Analysis administrator Louis J. Freeh was called trustee for the MF defalcation case. He was appointed by U.S. Trustee Tracy Hope Davis alive beneath the ascendancy of U.S. Defalcation Court Judge Martin Glenn.38

Disappearance of customer funds and investigation

U.S. regulators accept subpoenaed MF Global’s auditor, PricewaterhouseCoopers LLP, for advice on the allegory of assets acceptance to audience trading on U.S. article exchanges. The aggregation is accepting advised by regulators for money missing from applicant accounts. The arrears in applicant accounts at MF Global Holdings Ltd may be about $1.2 billion, according to the trustee liquidating the company.39 Rolling Stone appear in April 2012 that the amount stands at $1.6 billion, and that "nobody disputes the actuality that MF Global admiral biconcave into chump accounts and took...customer money." 40

Corzine was heavily complex with the absolute debt trades that led to the company's demise; the close took on the positions at his advancement as CEO and Chairman.41 42 At atomic one structured accounts analyst has declared that Corzine's MF Global acceptable had a amount of canicule in 2011 in which the company's bets on absolute debt would accept appropriate the use of chump funds to accommodated basic requirements, thereby advancement operating funds and possibly all-embracing solvency. 43 The New York Times appear as of December 2011 "investigators are now analytical whether MF Global was accepting abroad with such adulterous transfers as aboriginal as August...a adumbration that would point to atrocity even afore the close was disturbing to survive." 44 The Times aswell appear that, as MF Global struggled to pay aback creditors afore locations of the close could be awash afore declaring bankruptcy, "MF Global biconcave afresh and afresh into chump funds to accommodated the demands." 45 Bloomberg News appear that such transfers occurred, on at atomic one occasion, "Per JC's Jon Corzine's absolute instruction," according to an centralized announcement apparent by Congressional board and Bloomberg. 46 According to Bloomberg, assembly with JP Morgan, who provided acclaim for MF Global's operations, were aswell anxious about the antecedent of funds acclimated to advance or pay aback acclaim lines. Bloomberg appear that "Barry Zubrow, JPMorgan’s arch accident officer, alleged Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be active by Edith O’Brien to ensure that MF Global was acknowledging with rules acute customers’ accessory to be segregated. The letter was not alternate to JPMorgan."47 Corzine himself told Congressional board that "I never advised anyone at MF Global to abusage chump funds and I don’t accept that annihilation I said could analytic accept been interpreted as an apprenticeship to abusage chump funds." 48 A Bloomberg adventure appear that "Lawyers said it was no abruptness that he afresh focused on absorbed in his testimony," because proving absorbed is allotment of the accountability of prosecutors in bent artifice cases. 49 The case has admiring analysis from a amount of bent administration and authoritative bodies, including the Article Futures Trading Commission, the Securities and Exchange Commission, the Federal Bureau of Investigation, Congressional investigators, and possibly the Justice Department. 50

On April 13, 2012, Fox Business appear that a bent case was acceptable added likely, possibly by alms amnesty to a aloft broker of MF Global, Edith O'Brien. The announcement cited above, requesting a alteration of funds that acceptable included chump money, "per JC's Jon Corzine's absolute instructions," was accounting by O'Brien. The address declared that "Prosecutors accept O’Brien, as the firm’s abettor broker and one of the humans in allegation of MF Global’s funding, holds the key to whether arch admiral at the firm, including aloft arch controlling Jon Corzine, either gave absolute orders for the alteration of chump funds to accumulate the close animate during its final days, or knew chump funds were accepting used." 51 According to the reporter, Charlie Gasparino, "criminal authorities are already afresh actively belief bent accuse adjoin arch admiral at the firm, including Corzine, based on the anticipation of O’Brien’s testimony." 52 Corzine in his Congressional testimony, and his attorneys accept acicular to O'Brien as a accessible affair amenable for accident of chump money; accompany of O'Brien said she was "being set up as a 'patsy'." 53 On March 28, 2012, O'Brien invoked her Fifth Amendment appropriate adjoin self-incrimination at a Congressional audition and beneath to affirm about the missing funds, or any added amount accompanying to MF Global's bankruptcy. 54 On April 24, 2012, Jill Sommers, a CFTC commissioner, categorical accessible administration accomplishments adjoin MF Global advisers and executives. Potential violations absorb rules that crave allegory of chump funds from a brokerage's own operating accounts, rules that ban annexation of chump funds, apocryphal statements, and statues that abjure "deceptive schemes." 55 She added said civilian administration accomplishments could be brought adjoin the aggregation or companies, advisers and executives.56 James Koutoulas, an advocate alive on account of MF Global's allowance barter afterwards the company's bankruptcy, declared in April 2012 that "Crimes accept been committed actuality after a doubt. We anticipate there are abundant facts out actuality to alpha arresting humans and alpha filing charges." 57 As of April 2012, no accuse accept been adjoin Corzine, or any added of MF Global's aloft admiral or employees.

Board of directors

At the time of its defalcation filing, MF's lath of admiral was:58

Jon S. Corzine, Chairman and Chief Executive Officer

David P. Bolger, absolute member, aforetime Chicago 2016 and Aon Corporation

Eileen S. Fusco, advocate and CPA aforetime for Deloitte & Touche

David Gelber, absolute member, aforetime ICAP plc, Citibank NA, Chemical Bank and HSBC

Martin J.G. Glynn, absolute member, above CEO HSBC

Edward L. Goldberg, architect of Longview Investments, LLC, aforetime Merrill Lynch

David I. Schamis, managing administrator at J.C. Flowers & Co. LLC,

Robert S. Sloan, architect and managing accomplice of S3

In the actual deathwatch of the bankruptcy, Corzine5960 and the board61 were criticized in the banking columnist for their credible non-awareness of the company's action in the actual lead-up to the accident and their credible inabilities to administer the accident the aggregation had assumed.