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Jon Corzine (Yes, That Jon Corzine) May Start A Hedge Fund

This article is more than 10 years old.

Brace yourself, and your wallet. Jon Corzine may open up a hedge fund.

Jon "I simply do not know where the money is" Corzine.

Corzine is the former CEO of MF Global.  The commodities brokerage firm went bankrupt in October after making bad bets on Europe. The bets went so bad that the firm apparently used customer money to fund a growing liquidity crisis.

That was over ten months ago. Today MF Global clients are still missing $1.6 billion in assets. Corzine, the former Goldman Sachs CEO and former New Jersey governor, testified before the House Committee on Agriculture last year over the matter saying he has no idea where the money went.

“I simply do not know where the money is or why the accounts haven’t been reconciled,” he said and added that as CEO of MF Global Holdings, he is ultimately responsible.

It turns out he may not be ultimately responsible. The New York Times reports that prosecutors are dropping their criminal investigation against Corzine and top executives there for their role in the MF Global catastrophe. "After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear," the newspaper reports.

How could prosecutors drop a case where over one billion dollars in client money has gone missing , and where a CEO is throwing his hands up and saying he has no clue? Cornelius Hurley, director of the Boston University Center for Finance, Law & Policy explains, "The problem is just that. The money is somewhere but they can't find it so you have a crime but no body and typically you have to find the body first."

Corzine could still face civil actions by regulators. But prosecutors are throwing in the towel and that won't sit well with many across the country who have yet to see a top Wall Street executive face criminal charges for their bad behavior. "It gets your blood boiling," says Hurley, former counsel to the Fed Board of Governors.

He notes that the statute of limitation on charging Corzine far off "so for anyone to say this early in the game that [Corzine] is off the hook criminally is a someone that didn't have the courage to convict him anyway."

So what about that hedge fund Corzine is apparently considering? It's only mildly surprising that he's weighing that option. "Memories are very short on Wall Street," says Dan Seiver chief economist at Reilly Financial Advisors, a San Diego wealth management firm.

Seiver points to the Barry Minkow. A convicted felon who went to jail for conducting a $100 million Ponzi scheme during the 1980s. After serving 25 years in jail, Minkow rejoined the world as a fraud detective helping the FBI and SEC identify financial fraud. Last year he was sentenced to another prison term for another run-in with securities fraud.

And who can forget John Meriwether, the former head of the collapsed Long-Term Capital Management which needed to be bailed out to the tune of $3.6 billion. He later founded other hedge funds including JWM Partners. "When that hedge fund was battered during the financial crisis — reports had it losing 44% — he shuttered it and started a third fund," MarketWatch notes.

For Corzine, it appears it won't be too difficult to raise money for a hedge fund and start charging 2 and 20. Anthony Scaramucci, founder of hedge fund SkyBridge Capital, apparently has no qualms with handing over money to Corzine telling BI, "Yes, I trust Jon Corzine and think if he starts a fund he will make money and be very successful.

Hurley, the Boston University law professor, has this solution for people still willing to give Corzine money: a guardian ad litem. That's a court appointed guardian for individuals who are deemed legally incompetent.