MF Global Holdings Ltd. (MF) 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.
MF Global ran futures and securities brokerages and was required to segregate funds posted as collateral by futures clients. The company filed the eighth-largest U.S. bankruptcy after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations.
The Commodity Futures Trading Commission, Securities and Exchange Commission and U.S. Justice Department are investigating cash movements at the firm before the bankruptcy filing. The CFTC has been probing about $600 million in futures client funds that disappeared as the firm prepared for bankruptcy. Regulators haven’t located the money.
“Segregation of customer funds is at the core of customer protection in the commodity futures and options markets and must be maintained at all times,” Jill E. Sommers, the most senior CFTC commissioner overseeing the probe, said in a Nov. 10 statement.
Jeremy Skule, an MF Global spokesman, declined to comment.
CME Group Inc., the world’s largest futures exchange, audited MF Global during the week before the bankruptcy and found the accounts were properly segregated. The shortfall in client funds was discovered during the weekend before the bankruptcy. Gary Gensler, CFTC chairman, said he first learned of the missing funds during a 2:30 a.m. call on Oct. 31.
‘Avoid Detection’
Transfers at MF Global were made “in a manner that may have been designed to avoid detection,” CME said in a Nov. 2 statement.
The Wall Street Journal and New York Times reported earlier today on MF Global’s shift of client money.
Gold Lures Central Banks
LONDON—Total central-bank gold purchases in the third quarter more than doubled from the second quarter and were almost seven times higher than a year earlier as countries continued to diversify reserves, according to a World Gold Council report.
At 148.4 metric tons, gold buying among central banks was at the highest since the sector became a net buyer of the precious metal in the second quarter of 2009, according to the quarterly report.
Central banks and other official institutions, by comparison, had bought 66.5 tons of gold in the second quarter and 22.6 tons in the third quarter of 2010.