The MF Global Saga Pieced Together part 1 of 3

MF Global, headed by former New Jersey Senator and Goldman Sachs CEO Jon Corzine, filed for bankruptcy yesterday, but reports that $700 million is missing has spooked creditors and others on Wall Street,  reports DealBook’s Azam Ahmed. Best case scenario, the “missing money” is just sloppy “internal controls,” but worst case scenario, the financially unstable MF Global diverted customer funds to back its own trades. Either way, the news has made MF Global’s chance for survival dim; report DealBook’s Ben Protess, Michael J. De La Merced and Susanne Craig. “Customers’ funds must be kept separate from company money,” they write. “One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis.” For now, neither Corzine or MF Global have been accused of anything, but the firm has been suspended from trading on the London Mercantile Exchange and futures market CME Group, reports the San Francisco Chronicle.

The day after the market closed down 276 points, on fears that the trouble at MF Global would spread to other firms, explains Ahmed. “With MF Global filing for bankruptcy on Monday, investors pummeled many financial stocks, fearful that problems were lurking on the books of other Wall Street firms,” he writes. “It was a crisis of confidence, not unlike in 2008 when the markets punished stocks on mere speculation of trouble.” But it might not be as bad as 2008, MF Global’s rocky status didn’t have the same effects as the Lehman Brothers debacle, explain The Wall Street Journal‘s Mike Spector, Jacob Bunge and Aaron Lucchetti. “The ripple effects from MF Global’s collapse were far less dire, though customers and traders who buy and sell stocks, commodities and other investments through the New York company scrambled to move their business elsewhere.” n a mere 24-hours, MF Global has gone from being a bankrupt brokerage firm with a famous CEO to a federal investigation soon involving the FBI. NBC New York reports that the FBI alongside federal prosecutors are about to join the investigation into how as much as $700 million went missing from the accounts of clients at MF Global, the brokerage lead by former New Jersey Governor and the CEO of Goldman Sachs Jon Corzine. In a separate inquiry, the Justice Department, the Securities and Exchange Commission and the Commodities Future Trading Commission will also be investigating the firm’s collapse, according to the report. An SEC spokesman tells NBC New York that MF Global has “possible deficiencies in customer futures segregated accounts held at the firm.”

How fast things have changed for MF Global and Corzine. Earlier this afternoon, the Associated Press broke news that MF Global admitted to co-mingling client money with its own funds during a phone call with federal regulators on Monday morning. The AP noted that the action could be civil violation. “Government rules require securities firms to keep clients’ money and company money in separate accounts.”

That revelation followed news this morning that CME Group, the exchange regulator that supervises MF Global, disclosed during an earnings call that MF Global had broken securities rules requiring brokerage firms to separate client money from their own trading accounts. Though CME Group’s chief executive Craig Donohue said he wasn’t sure the extent of MF Global’s violation, he said CME was launching an investigation. “While we are unable to determine the precise scope of the firm’s violation at this time, we are investigating the circumstances of the firm’s failure,” he said.

continued see part 2

this article is a combination of various news sources and articles.