MF Global’s customer account discrepancies spur regulatory probe

Regulators say at least $700 million in customer money is missing

MF Global Holdings Ltd. collapsed into bankruptcy yesterday after a potential buyer discovered a major money problem at the securities company and halted negotiations.

MF Global, which former New Jersey Governor and ex-Goldman Sachs Co-Chairman Jon Corzine runs, was about to finalize a deal in which it would sell its assets to rival Interactive Brokers Group Inc. when Interactive Brokers discovered a discrepancy in customer accounts. Federal regulators estimate that as much as $700 million in customer money is missing.

According to the New York Times, regulators are investigating whether the discrepancy was due to sloppy bookkeeping or whether MF Global used customers’ money to support its own trades before it collapsed.

The regulatory probe is another demerit for Corzine, who came to MF Global last year after he was defeated for re-election as governor. Upon arriving at MF Global, Corzine sought to increase the company’s profits by purchasing European countries’ debt at a cheap price; his money-making strategy banked on whether Europe could solve its debt crisis, which is still ongoing.

MF Global listed debt of $39.7 billion and assets of $41 billion in its bankruptcy filing. The Wall Street Journal reports that Skadden is handling the company’s bankruptcy, which is the eighth largest in U.S. history.

The Journal also reports that MF Global owes thousands to top law firms, including Sullivan & Cromwell, which is owed nearly $600,000; Wachtell, which is owed $388,000; Linklaters, which is owed $348,000; Shearman & Sterling, which is owed $135,000; and Holland & Knight, which is owed $59,000.

Ashley Post

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