MF Global Holdings Ltd. used about $700 million of customer funds to “meet liquidity issues” in the days prior to its bankruptcy, according to CME Group Inc., which had auditing authority over the failed futures broker.
Regulators are investigating whether MF Global Holdings Ltd. intentionally used customer funds to cover the bankrupt firm’s margin payments on European government bond trades, bolstering their ability to retrieve the missing money, people with knowledge of the probe said.
Jon Corzine bet $11.5 billion on European sovereign debt in his bid to rebuild profits at MF Global Holdings Ltd., almost twice the net amount disclosed to investors, and relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over.
MF Global Holdings Ltd. moved hundreds of millions of dollars from its futures client accounts to its own securities brokerage before its Oct. 31 bankruptcy, according to person familiar with the audit of the company.
Examiners from CME Group Inc., the world’s largest futures exchange, found unexplained wire transfers at MF Global Inc. and a $900 million shortfall in client funds during the weekend the failing broker was talking with possible buyers, a person briefed on the matter said.
MF Global Holdings Ltd. customers may have to wait years to get their money back if the futures broker is sued, according to Frederick Grede, the liquidation trustee overseeing the bankruptcy of Sentinel Management Group Inc.
MF Global Holdings Ltd., under investigation by U.S. regulators after filing for bankruptcy protection, violated requirements that it keep clients’ collateral separate from its own accounts, the head of the world’s largest futures exchange said.