MF Globals Holdings Ltd (MF)

Re: MF Globals Holdings Ltd (MF)

Postby kennynah » Fri Nov 04, 2011 2:43 am

USD633mil went missing...

we are seeing a fraud unfolding..

some one will be joining that ponzi scammer in prison soon...
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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Fri Nov 04, 2011 2:16 pm

Not sure how much of this is true... but MF story may overshadow the PIIGS issues.

---
On MF

http://brucekrasting.blogspot.com/2011/ ... l#comments


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The MF Global story gets more bizarre by the minute. At this point one has to ask if it could become a systemic problem. At first, I did not think so. I’m rethinking that. There is no definitive information as of yet. The CFTC is suggesting that the missing client money is $633mm. It might be larger than that (Zero Hedge Link). Some thoughts:

I was one of many who tried to stave off the bankruptcy of Drexel Burnham Lambert in 1989. Skadden Arps, (the same law firm who is advising MF today) was involved in the last month as the chess game played out. They were advisers. Their clear advice was to NOT commingle custody accounts. To commingle funds is potential jail time for any involved. Drexel went down. But client money/assets were returned.

Of course Corzine and all the other seniors at MF knew this. Skadden was giving them the same advice as they gave to DBL 20 years ago. So how can it be that three days after a chapter filing there appears to be a very big hole?

This happened with another big future’s house back in 2005. That was Refco. In that case there were significant client account losses. Of historical interest:

-Phil Bennet, the boss at Refco, went to jail for 12 years.


-Man Group bought what was left of Refco (they were good futures brokers).


-Man became MF Global. Rinse and repeat.


The history is relevant as it is more evidence that Corzine and MF management HAD to know that commingling was the ultimate no-no. It was part of their history.

My guess is that the missing cash was grabbed by one (or more) of the big players in the global bond market. MF did not sign off on the cash grab. The banks moved on them and their customer accounts. MF had no say in the matter.

Given Corzine’s relationship with Goldman I put them high on the list of probable plug pulling bankers. Nomura was a place to go to finance AAA sovereign positions. One of the French or German banks could have been the warehouse for MF’s sovereign exposure. It wouldn’t surprise me if any one of them pulled the plug on the leveraged bets.

It should be noted that all of the big players talk when they are moving on collateral and closing relationships with financial firms.When the SHTF, they act as one.

MF has said that the funding for the sovereign exposure was “locked up” to maturity. That’s complete bullshit. I can tell you from first hand knowledge. When Wall Street is financing positions they always have a MAC (Material Adverse Change) provision that allows them to call the financing. If the debt is not immediately repaid it produces an event of default. That creates a cross default to all other asset positions. When they smell trouble they move first and ask questions later. They always lock up cash.

If you think this sounds far fetched consider what happened at Refco:

Refco’s forex brokerage arm, Refco FX, LLC, was holding over 17,000 retail customer brokerage accounts at the time that Refco declared bankruptcy shortly thereafter. In the bankruptcy proceedings, Bank of America and other large creditors managed to convince the bankruptcy court that Refco’s customers were actually unsecured creditors because of Refco’s failure to segregate its customer accounts from their own general funds, despite telling customers that it had done so.

Most of the broker’s 17,000 customers eventually received little or no compensation.



This is not supposed to happen. FINRA is the watchdog for this. Their words on how “safe” customer accounts are with registered brokers.

In virtually all cases, when a brokerage firm ceases to operate, customer assets are safe and typically are transferred in an orderly fashion to another registered brokerage firm. Even if a firm fails, its customers' assets will be safe.

So much for FINRA.

Where could this go?

I think some drop in confidence by market investors in secondary firms has to happen. Money has to leave those players. With that, will go the flow trading that comes with the accounts. Liquidity across all markets (especially futures) will be affected.

If we go down this road (we will if MF/the Banks actually used/seized clients money) the short-term consequence will be another big ramp up in volatility. Most assets classes will suffer in that environment.

Leveraging of "liquid" assets is a critical component of the global system. The repo markets are already under serious attack. The MF story could take us to a new level.

The absolute craziest outcome would be that we learn that it was Goldman who closed the books and seized the cash last Friday (someone did). It would be even crazier if this leads to a problem that gets out of hand. There’s a decent chance that it plays out along these lines.

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2. The trend will END but I don't know WHEN.

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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Fri Nov 04, 2011 7:41 pm

JON CORZINE Resigns
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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Fri Nov 04, 2011 7:44 pm

MF Global Liquidators See Asia-Pacific Units Sales

http://online.wsj.com/article/SB1000142 ... 97682.html


Note:
- Will DBS be buying the assets?
- Just a couple of days back, DBS has highlighted that they will be keen to acquire assets of those pulling out of Asia.
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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Fri Nov 04, 2011 7:49 pm

iam802 wrote:JON CORZINE Resigns



And the story continues...

--
Corzine Hires Criminal Attorney

http://dealbook.nytimes.com/2011/11/04/ ... -attorney/


Jon S. Corzine has hired Andrew J. Levander, a leading white-collar criminal defense lawyer, according to three people briefed on the matter, as the former New Jersey governor deals with fallout from the collapse of MF Global, the brokerage firm he has run since last year.

Federal authorities including the Federal Bureau of Investigation and the Securities and Exchange Commission are investigating the $630 million in missing customer funds at MF Global.

Mr. Levander could not be reached as he is out of the country, according to his assistant. He did not return an email seeking comment. Daniel O’Donnell, the chief executive of his law firm, Dechert, declined to comment.

In Mr. Levander, the chairman of Dechert, Mr. Corzine has retained a New York lawyer who is no stranger to defending prominent Wall Street executives. He represented John Thain, the former chief executive at Merrill Lynch, in a government inquiry related his role in Merrill’s sale to Bank of America. Ezra Merkin, a hedge fund manager who invested with Bernard L. Madoff, hired Mr. Levander to defend him against a New York attorney general’s lawsuit connected to the Madoff case.

“Andy is not just smart but has a deep understanding of the investigative process,” said Steven M. Cohen, a defense lawyer at Zuckerman Spaeder in New York and the former top aide to Governor Andrew M. Cuomo. “He understands how cases are built and therefore how they are defended.”

Other recent high-profile assignments for the bow-tie clad Mr. Levander include his representing the outside directors of Lehman Brothers, and the company Monster, a jobs website, in a government investigation relating to the backdating of employee stock options. In 2004, he obtained an acquittal for Michael Rigas, a former Adelphia Communications executive, in a criminal trial. A jury convicted Mr. Rigas’s father and brother in the same case.

Like much of New York’s white-collar defense bar, the bow-tie clad Mr. Levander is a former federal prosecutor in Manhattan. A graduate of Tufts University and Columbia Law School, Mr. Levander clerked for Judge Wilfred Feinberg on the federal appeals court in Manhattan. He joined Dechert in 2005 after it acquired Swidler Berlin Shereff Friedman, a small New York firm where he had worked.

In addition to Mr. Levander, Mr. Corzine has hired another law firm to represent him in the Chapter 11 proceeding. According to a court filing on Thursday, he has retained Alan D. Smith and Schuyler G. Caroll, a pair of bankruptcy lawyers at Perkins Coie.

Mr. Corzine, who before his political career in New Jersey ran Goldman Sachs, has already been named as a defendant in a lawsuit. On Thursday, a shareholder filed an action against him and three other MF Global executives over their role in the brokerage’s collapse.

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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Sat Nov 05, 2011 1:44 am

MF ACCOUNT WITH $658.8M IN CLIENT FUNDS SAID TO BE AT JPMORGAN
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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Sat Nov 05, 2011 1:59 am

Auditor PwC Should Have Been on Top of MF Global

http://www.americanbanker.com/bankthink ... 821-1.html


Given the initial coverage, you might think that the sad story of MF Global’s demise is all about John Corzine.

It’s a familiar story: The tragic flaw of hubris drives a former governor, U.S. Senator, and Goldman Sachs CEO to bet the farm and bankrupt a company that’s been around since James Man started a sugar trading business in 1783. Only a “master of the universe” type would joke to the press, just days after taking over the publicly traded company in March 2010, “I hadn’t heard of this company a week ago.”

Corzine surely blundered, but he was far from alone.

The second most obvious storyline is that regulators ignored the MF Titanic heading for a sovereign risk iceberg. Press reports have characterized CME Group as MF Global’s “primary regulator” but I’m not sure that’s a job the exchange operator wants. That honor belongs officially to the Commodity Futures Trading Commission. CME Group has been actively communicating with the media in an attempt to get ahead of any criticism for its role.

An already bad MF Global bankruptcy story spun out of control and careened off the road late Monday. That’s when MF Global executives admitted to the regulators that Interactive Brokers had refused to catch Corzine’s Hail Mary pass and buy the company because the numbers just didn’t add up. Regulators found hundreds of millions of dollars belonging to customers had gone missing, and were investigating whether MF Global had used some of those funds to support its own bets, The New York Times reported.

And this is where we come to the party that up until now hasn’t received its fair share of scrutiny: PricewaterhouseCoopers, which as MF Global’s auditor was supposed to be the first-response regulator.

A week after I wrote in my BankThink column that the relationship between PwC and MF Global was too cozy for my taste, the regulators are catching up. Late Thursday, Bloomberg reported that regulators had subpoenaed PwC for “information on the segregation of assets belonging to clients.”

The CFTC’s action against PwC probably came as a result of a shocking CME Group announcement late Wednesday: "It now appears that the firm [MF Global] made … transfers of customer segregated funds in a manner that may have been designed to avoid detection." These transfers, CME Group said, appeared to have taken place after its audit team showed up last week at MF Global to take a look and found everything to be in order.

CME Group couldn’t have been hoodwinked like that if PwC had been doing its job all along. You can't circumvent controls unless there are none or there are holes. It was PwC’s job to review controls and the adequacy of policies and procedures to support them.

Since MF Global is a broker-dealer and a Futures Commission Merchant, PwC’s job went well beyond a standard audit. The auditor for a firm like this must annually review the procedures for safeguarding customer and firm assets in accordance with the Commodity Exchange Act. The annual audit must include a review of a firm’s practices and procedures for computing the amounts that, by law, have to be set aside in clients’ accounts each day. MF Global also had to send regulators an annual supplemental report from PwC. This report would describe any material inadequacies existing since the date of the previous audit and any corrective action taken or proposed.

I’m sure the CFTC wants to know if PwC ever documented any material inadequacies in MF Global’s controls over safeguarding customer assets. But wouldn’t they already know that? Regulators like the CME Group, the CFTC, the SEC, and FINRA received audited financial information annually, unaudited information semiannually and monthly reports that provided a capsule view of MF Global’s financial position. MF Global is required to perform calculations daily (by the CFTC) and weekly (by the SEC) to ensure that the proper amount of customer funds is set aside in the separate accounts.

The regulators read these reports and do periodic check-ups, but they’re not primarily looking for ways that someone can fudge them or overrule procedures and systems. That’s PwC’s role. (The firm declined to comment for this article.)

I’d like to say that financial services firms and their auditors have had no problems complying with these customer asset segregation regulations. But I can’t.

For example, in August of 2007, the SEC needed an emergency temporary restraining order to stop Sentinel Management Group from continuing to loot customer accounts after declaring bankruptcy. Sentinel, which prior to filing for Chapter 11 protection claimed to have $1.2 billion in assets under management, defrauded its clients by improperly commingling, misappropriating and leveraging those clients' securities without their knowledge in violation of the Investment Advisers Act of 1940.

Among its improper activities, Sentinel transferred at least $460 million in securities from client investment accounts to Sentinel's proprietary "house" account. Sentinel also used securities from client accounts as collateral to obtain a $321 million line of credit as well as additional leveraged financing.

More recently, last year JPMorgan Chase's futures and options desk neglected to segregate billions of dollars of client money, largely belonging to hedge funds. PwC, the auditor of JPMorgan Chase, and the bank - which is also MF Global’s main banker - admitted to U.K. regulators that for at least seven years, about $23 billion dollars of clients' assets had not been properly segregated. JPMorgan Chase was fined 33.3 million pounds and PwC is subject to sanctions.

Imagine if JPMorgan Chase weren’t the fortress that came out of the 2008 financial crisis as a relative winner. If the bank had collapsed like Lehman, the client asset segregation problem uncovered in the U.K. last year would have caused chaos. Ernst & Young, Lehman’s auditor, is also under investigation in the U.K. for similar lapses in its audits of compliance. Many hedge funds are still fighting costly and protracted litigation because of the asset segregation failures at Lehman.

If only the idea of someone moving customer assets to the “house” account in response to a liquidity crisis were beyond the scope of the imagination. But such shenanigans have happened in real life. And if they did happen at MF Global, it would be PwC’s fault as much as Corzine’s.


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2. The trend will END but I don't know WHEN.

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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Tue Nov 08, 2011 10:27 pm

This is going to piss lots of people.

==
MF Global paid bonuses just hours before bankruptcy

http://www.telegraph.co.uk/finance/news ... uptcy.html

Staff are understood to have received quarterly bonuses last Monday. It is not clear whether the bonuses were also received by staff in the US.

The news is likely to anger those MF Global customers who have still been unable to access money they held with the broker.

KPMG, the administrator for MF Global's UK business, has closed less than half of the company's open positions in the past week. The accountancy firm said there were 1.61m open positions when MF Global collapsed on October 31. Yesterday, KPMG said it had managed to close 650,000 of these by Friday.

KPMG also said MF Global UK's entire foreign exchange portfolio had now "been unwound" – representing a "notional value of $60bn (£37.4bn)". The broker's spread betting and contract for difference customer positions have also been closed.

The news follows criticism from some MF Global UK customers, who expressed concern at KPMG's handling of the administration.

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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Wed Nov 09, 2011 10:53 pm

Money can't be found. Let's share the losses, ok?

Account holders are screwed. They are last in line when it comes to being creditors.

I wonder, what's the situation in SG.

===
MF Global Clients May Have to Share Cash

http://www.bloomberg.com/news/2011-11-0 ... -says.html

MF Global Inc.’s commodity customers may be required to share some of their cash with other clients unless money missing from some accounts is found, said the head of the group overseeing the liquidation of the broker-dealer.

“Distribution of the assets will be pro rata, if there’s insufficient there to fulfill all obligations,” said Stephen Harbeck, president of the Securities Investor Protection Corp., or SIPC.

About $593 million in commodity customer funds are unaccounted for, according to a person with knowledge of regulatory probes into the failure of the New York-based firm.

The trustee liquidating the brokerage, James W. Giddens, has transferred 17,000 accounts to other firms, out of 50,000 commodity accounts that he said he would relocate, while releasing almost $1.6 billion in collateral, said Kent Jarrell, his spokesman. Many remaining accountholders may have to file claims for their assets, which have to be shared fairly with other claimants, Jarrell said.

Unless the missing cash is found, people hoping to recover 100 cents on the dollar may have to give up some of it to other customers, Harbeck said yesterday a phone interview.

“Giddens can’t let out more than a low percentage of assets before he knows what he owes to all commodity customers,” Harbeck said.

By law, while SIPC can compensate securities customers for missing cash, it can’t advance funds to commodity customers to replace cash, he said.

Corzine Resignation

MF Global’s parent listed $39.7 billion in debt and $41 billion in assets in its bankruptcy filing on Oct. 31. The company was run by former New Jersey Governor Jon Corzine, who was previously co-chairman of Goldman Sachs Group Inc. (GS), until his resignation from MF Global, which was announced Nov. 4.

Customers of MF Global are asking when they’ll get their cash back, according to e-mails to Bloomberg News. If they have to file claims, the trustee must first get court approval for a system to handle claims and mail forms, Jarrell said yesterday in an e-mail.

A trustee’s duty is “to identify and marshal assets available to satisfy customer claims and to maximize the estate for all stakeholders in an orderly and fair process,” he said.

Commodity accounts that haven’t been transferred, along with securities accounts, will “most likely be subject to the claims process,” he said. Giddens is trying to find brokers to take “bulk” transfers of security accounts, Jarrell said.

Commodities Accounts

Giddens froze 150,000 customer accounts on Oct. 31, including the 50,000 commodities accounts that he said he aimed to transfer to other futures brokers.

MF Global commodity traders sought court permission yesterday to transfer cash out of the brokerage’s accounts, saying they believe the company has the funds needed to make whole each of the accountholders.

Thomas A. Butler Jr., James H. Barton Jr., Stuart Satullo and Adam Loos asked for an order that would let them withdraw 85 percent of their cash or transfer it to another registered future commission merchant, according to court papers. The men said they had all liquidated their accounts with the brokerage and held only cash. As customers, they should be given priority over creditors of the bankrupt estate, the group said.

Butler, president of Butler Brokerage Corp., is a floor broker at Intercontinental Exchange who said he regularly trades commodity futures contracts on behalf of himself and clients. He had $576,310.54 in his accounts after he liquidated his positions Oct. 31 upon hearing of the bankruptcy, Butler said in court papers.

Satullo had $200,020, Barton had $1.7 million and Loos had $6,000 in their respective accounts as of Nov. 7, according to court papers.

The case is In re MF Global Inc., 11-ap-2790, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Re: MF Globals Holdings Ltd (MF)

Postby iam802 » Fri Nov 11, 2011 7:11 am

Seems to me.. the story unfolding could be like one of those 'Enron'

===

MF Global’s Missing Funds May Be ‘Massive’ Ploy: CFTC’s Chilton

http://www.bloomberg.com/news/2011-11-1 ... -says.html
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