MF Global Bankruptcy Case Study
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Durkin states. Chilton states. I'm confident that consistently, we overlook plenty of things that have the potential to be illegal. Deterioration of the Eurozone economies in mid resulted in large margin phone calls on Corzine's trade along with a liquidity crisis at MF Global. And with that, lower than two years immediately after Mr. We determine what you happen to be considering Appears reckless to hazard an entire firm about the very volatile sovereign personal debt of a bunch of countries labeled the "PIIGS", ideal?
Sixty-8 per cent of american citizens -- the very best Gallup has recorded -- believe increases in Earth's temperatures over the last century are mainly as a result of the consequences of pollution from human activities. EST on February 28 to discuss the matter. On March 17, , shares of MF Global plummeted on liquidity fears. Corzine spent nearly all of the 9 years prior to joining MF Holdings as either U. Senator or governor. From , Corzine held the role of chief executive officer for Goldman Sachs. Customer accounts were frozen the same day. Initial media reports suggested impropriety on Corzine's part, but this was later disproved. According to the New York Times, the employee responsible for the transfer emailed Corzine stating the transfer was a "House Wire", meaning it came from the firm's own account.
The instructions Corzine had given were to deal with several overdrafts at JPMorgan Chase, but never related to any specific accounts or specific transfers made. A spokesperson for Corzine responded that Corzine "never directed Ms. O'Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose. Nor was he informed that customer funds had been used for that purpose. Subsequent court filings also attest to this fact. A spokesman for Corzine said "Mr.
Corzine is very pleased that all customers will receive a full recovery. This is a great outcome, which has been anticipated for many months. The brokerage used a large number of complex and controversial repurchase agreements or "repos" for funding and for leveraging profit, many off their balance sheet. Failure of the repo positions helped cause the liquidity crisis at the firm. In response Moody's and Fitch cut the company's credit rankings to junk. Corzine was working to find a buyer, according to several reports.
The firm's board met through the weekend of October 29 and October 30 in New York to consider options including a sale to avert failure, according to a person with direct knowledge of the situation. This became the eighth largest bankruptcy protection filing in the history of the United States to that time. Bankruptcy Court in Manhattan" after making bets on European sovereign debt. MF Global filed for bankruptcy protection because of heavy purchases of sovereign debt from some mired in the European Debt Crisis including Ireland , Italy , Portugal , and Spain. The problems of the week preceding the Chapter 11 filing scared off investors en masse.
Upon the filing, credit ratings agencies immediately cut the ratings of MF Global to junk status. Some commentators have suggested the failure of MF Global highlights the difficulty in regulating complex global financial firms, the dangers of off-balance-sheet accounting as well as touching on the European sovereign debt crisis. Many took its collapse as a reminder that whatever the root causes of the financial crisis of — , some of the primary problems remain because of the lack of needed regulatory changes.
As administrative agent, JPMorgan structured a revolving credit facility. At the time of its bankruptcy filing, MF's board of directors included: . In the immediate wake of the bankruptcy, Corzine   and the board  were criticized in the financial press for their apparent non-awareness of the company's condition in the immediate lead-up to the event and their apparent inabilities to manage the risk the company had assumed. Trustee Tracy Hope Davis, working under the authority of U. Bankruptcy Court judge Martin Glenn. Louis Freeh came under criticism following his appointment as MF Global Holdings bankruptcy trustee from politicians, commentators and former federal officials for trying to capitalize on cases such as MF Global and the Penn State sex abuse scandal, despite a federal career of his own that was fraught with controversy.
Other experts and observers, however, found Freeh to be eminently qualified, and an excellent choice for trustee. These individuals expressed confidence that Freeh and his team could sort through the financial mess at MF Global, find the best possible legal resolutions to suggest and retrieve as much money for clients as possible. The bankruptcy trustees office charged with liquidating MF Global fired 1, employees of the broker-dealer subsidiary on November 11, The terminated employees did not receive any bonuses, deferred compensation or severance pay. The trustee's office confirmed that about employees were hired back to assist in the liquidation process, including processing bankruptcy claims and wrapping up necessary business activities.
In addition to other investigatory work, U. MF convertible bonds to determine whether some investors sold the debt based on confidential information before the firm's demise. Clearly, client or customer accounts were misused to try to cover the bet made on European sovereign debt. Beginning in November , MF Global was investigated by regulators for money missing from client accounts. As the trustees and liquidators continued their work in early , they indicated that the total amount owed to clients was substantially higher. US and UK investors continued waiting to see if and when they would be repaid for the misuse of their client account monies. However, because rehypothecation is not allowed in Canada, the Canadian customers of MF Global were able to recover all their funds within 10 days.
Some prominent financial industry executives, journalists, regulators, politicians - and some MF Global clients - lay the blame for the demise squarely, and primarily, at Corzine's feet. On the day of MF Global's bankruptcy, a Bloomberg reporter wrote "Jon Corzine's risk appetite helped destroy his firm. It also provided an object lesson for Paul Volcker's campaign against proprietary trading on Wall Street. Many sources indicate Corzine was heavily involved with the sovereign debt trades that led to the company's demise, indicating the firm took on the positions at his urging as CEO and chairman. Structured-finance commentator Janet Tavakoli has alleged that Corzine's MF Global likely had a number of days in in which the company's bets on sovereign debt would have required the use of customer funds to meet capital requirements, thereby maintaining operating funds and possibly overall solvency.
JPMorgan drafted a letter to be signed by [Edith] O'Brien to ensure that MF Global was complying with rules requiring customers' collateral to be segregated. The letter was not returned to JPMorgan. Corzine himself told Congressional investigators during his testimony in December that "I never intended anyone at MF Global to misuse customer funds and I don't believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds.
A Bloomberg story reported that "Lawyers said it was no surprise that he repeatedly focused on intent in his testimony," because proving intent is part of the burden of prosecutors in criminal fraud cases. In his Congressional testimony, Corzine indicated that Edith O'Brien may have been at least partially responsible for the loss of customer money. His lawyers have also pointed to O'Brien. Friends of O'Brien said she was "being set up as a 'patsy'. From Wikipedia, the free encyclopedia. New York City. United States. Operating income. Retrieved 9 June November 22, Rolling Stone. April 24, Archived from the original on April 26, NYT DealBook. Retrieved November 10, Retrieved July 6,