When you’re a “Master of the Universe” like Jon Corzine, taking huge risks and betting billions of dollars on European government bonds is no problem—it’s fun! It’s what you do!
But when it comes to finding $600 million of missing client funds when your firm, MF Global, collapses into bankruptcy, that’s a different matter. Responsibly keeping track of client money, keeping accurate books and records—those are the basic skills that this Master of the Universe apparently lacks.
Indeed, acting prudently and putting your clients’ interests ahead of your own is kind of boring. And it is becoming painfully obvious that the Wall Street titans who ran MF Global can’t find $600 million.
As Rick Perry so memorably put it: Oops.
The drama of missing customer money that is unfolding from the wreckage of MF Global is enough to turn your stomach. Simply put, where on earth is the $600 million in MF Global customer funds?
According to a report in Tuesday’s Wall Street Journal [subscription required for full article], the hundreds of millions of dollars missing from MF Global accounts may have disappeared four days before the firm filed for bankruptcy at the end of October.
Regulators are trying to assess whether hundreds of millions of dollars in customer accounts were transferred in the week before the firm’s collapse. In a highly suspicious finding, regulators from the Commodity Futures Trading Commission say that those transfers were not recorded in MF Global’s general ledger.
“We’re still trying to assess how far back this goes,” said Thomas Smith, a CFTC official, according to the Journal. Mr. Smith made his comments on Monday before the Senate’s agricultural and banking committee.
The CFTC believes the missing money could still be somewhere inside MF Global, but admits that is a “remote possibility,” according to the Journal.
Here is the fundamental question: How, in late 2011, can we still have a system that allows this to happen?
The segregation of customer funds, a cardinal rule in our securities industry for the safety of investors, was of no importance at MF Global. And apparently, it had no real interest in keeping accurate books and records.
We have to ask: Is MF Global a possible re-run of Madoff, Stanford and the other scandals from the darkest days of 2008 and 2009? Let’s hope not, but as the days pile up with no answer to the mystery of the missing funds, the question has to be asked.
Disclosure: Zamansky & Associates are securities attorneys representing customers against Wall Street institutions in arbitrations and state and federal court litigations.
