Watchdog finds MF Global funds

City A.M. Reporter
US regulators now have a full picture of money transfers in the final days of bankrupt brokerage MF Global, and are working to sort out which transactions were legitimate, a top official said yesterday.

As a bankruptcy judge told MF Global it can finance its bankruptcy with cash pledged as collateral to lender JPMorgan Chase, a Commodity Futures Trading Commission exec said the watchdog “see[s] where all the transactions went”.

“We are far enough along the trail that we know where all the money went. Now it’s just finding out which ones of those transactions are legitimate and which ones of them are illegitimate,” said Jill Sommers, who is heading the CFTC’s review of MF Global.
She added that just because money was transferred out of a customer account to the broker-dealer account “doesn’t mean it was illegitimate”.

She declined to reveal details on the fund transfers until investigators have determined the purpose of all the transactions.

Lawmakers have increased the pressure on regulators to provide answers on what happened to hundreds of millions of dollars in missing customer funds.

In the past week, Congress has held two hearings during which they scolded MF Global’s overseers for not closely policing the firm and for seemingly not being able to detect what created the shortfall in customer funds.

A trustee liquidating the firm has estimated the shortfall could be as high as $1.2bn.

MF Global officials, including former chief executive Jon Corzine, have told lawmakers they simply do not know where the money is, and deny authorising the misuse of customer money.

There is no timetable for when the CFTC’s review will be complete.