Posted on 02/19/2012 3:44:28 PM PST by Libloather
No MF Global customer cash in JPM account: trustee
By Nick Brown
Fri Feb 17, 2012 5:11pm EST
(Reuters) - The trustee managing the assets of bankrupt MF Global Holdings Ltd said none of the roughly $26 million being used to fund the futures brokerage in Chapter 11 is part of a $1.6 billion shortfall in customer accounts.
**SNIP**
"After an exhaustive investigation - which included the review of volumes of bank statements and an extensive population of cash transaction activity during October 2011 - the trustee does not believe that any of the cash in the JPM account ... represents misdirected customer property," Freeh said.
MF Global, once headed by former New Jersey Governor Jon Corzine, collapsed amid fears about its exposure to risky European debt. Corzine stepped down on November 4.
Giddens is conducting a broader investigation into where customer money ended up. His spokesman on Friday said that investigation is ongoing.
"We don't disagree with the report about what is the MF Global Holdings Trustee's limited inquiry into an account," spokesman Kent Jarrell said. "In our effort to identify and return property to former customers, our investigation continues into accounts at relevant banks and depositories."
(Excerpt) Read more at reuters.com ...
If this is how commodity brokerage firms operate, then our entire farming system will be impacted. Farmers, silo owners and etc use hedging as part of their risk management for growing and harvesting crops. Imagine farmers all decide to sell locally and not risk losing their life savings to commodity companies who may secretly take on high risk investments, go bankrupt and seize the farmers entire account, or grain operator loses all his grain because it is collateral for his accounts. Gov better fix this or else there will be physical consequences in our food system and supermarket in US regions that do not have many farms.
I hope not. I don’t know how cash accounts were/are affected. I cannot imagine that the brokerage or creditor can have any legal claim to those assets.
The government did fix it, but for the brokers and lenders to brokers. I guess they argued that pledged assets could easily fall significantly in value since the pledge, and so collateral’s nominal value should be greater than the cash borrowed. So, margin users: Beware!
”we don’t know where it went” is another.
Yeah, I’m not getting that part at all.
Money doesn’t just disappear, they might have stolen it and then lost it, but it doesn’t just evaporate.
This is another story that would be page 1 news every single day if Corzine were a republican.
It defies imagination and common sense that these "financial geniuses" told Congress they dont know where the missing money went----$1.2 billion transferred in and out of MF Global continually.....all done by wire transfer------called EFT's. MF Global, and its ISP, have a clear record of when, where, and how much for EACH wire transfer......like your cell phone bill.
Each EFT is listed, the number dialed, the time of the call, and the duration.
Corzine and Abelow are making a huge mistake by underestimating the anger of those they left holding the bag----they stole from their investors and socked the state of NJ with massive debt, bankrupted several state agencies, and left the state pension fund 25% lighter, Billions of NJ tax assets are unaccounted for.
===============================================
SO WHERE IS THE MISSING MF GLOBAL MONIES? Time to connect the dots
<><> Corzine is a well-rounded operator. As Governor, he left the state of NJ $8 billion in debt. $8 billion went missing from one state agency....other agencies like UI and the Transporation Trust Fund went bankrupt with no explanation why. The $82 Billion state pension fund lost about 25%.
<><> OBAMA-CORZINE CONNECTION Right before Corzio’s reelection, Obama sent $17.5 Billion "stimulus" to NJ-—which promptly vanished. VP Biden is on record as having asked Corzine for financial advice upon taking office----Biden has a son and a brother involved with the Stanford offshore fraud (Stanford is in jail.)
<><> MF Global principal Brad Abelow was Corzine’s appointee as NJ Treasury Secy——controlling ALL NJ assets. Gov and Secy started an investment business——but the two “financial geniuses” said they did not know this was illegal.
<><> MF Global principal Chris Flowers handled Sen/Gov Corzine’s “blind assets” ......Flowers led the takeover of a Japanese bank for Corzine——while Sen Corzine passed a bill giving the bank a US tax break......said he "did not know" the bill benefitted him.
<><><><> All three of the above-named MF Global principals are G/S cronies.
<><> Corzine registered three corporations in super-secret financial haven——Delaware——BEFORE taking office.
================================================
<><> Ponzi king Bernie Madoff made a generous contribution to Corzine’s gubernatorial campaign.
<><> When he went to jail, investigators found Madoff had stashed billions offshore---into a labyrinth of financial entities.
Some $8.9 billion was funneled to Madoff through a dozen so-called feeder funds based in Europe, the Caribbean and Central America, ......a labyrinth of hedge funds, management companies and service providers that, to unsuspecting outsiders, seemed to compose a formidable system of checks and balances.
But the purpose of Madoff's complex architecture was just the opposite: the feeder funds provided different modes for directing money to Madoff in order to avoid scrutiny and generate more fees.
<><><><> Then-Gov Corzine made several highly suspicious trips to Israel when he had no political reason to be there. Israel is the only place in the world where you can take a suitcase full of money to a bank-— and nobody asks where it came from.
Israel also has many businesses in NJ funded with grants from NJ state tax coffers-----as well as a NJ-based Israeli Chamber of Commerce (perfect vehicles for money laundering).
All of these entities need rigorous investigation.
One of the problems is that most people are confused because they don't understand the difference or distinguish between the MF Global Holdings (a holding company that has declared bankruptcy, and which was a parent company of its main operating arm, MF Global brokerage).
Louis Freeh is a trustee of the holding company and is unwinding it now, its accounts with JPM are not the same as the brokerage's own trading account and brokerage's segregated customer accounts. James Giddens is unwinding the brokerage under SIPA rules, and is investigating the trail of money missing from segregated customers' accounts.
The article simply confirms that there were no problems with the holding company accounts at JP Morgan (a transfer agent and clearinghouse for both MFG entities) which was expected and is not at all surprising or unusual. In fact, the transfers (EFTs, of course) were only going one way, to MFGH, not from it, so it had no relationship whatsoever to the brokerage segregated accounts. Like I said, this part is a non-story.
For details, see: - FR, post #22, 2012 February 15 / WSJ, by Patrick Fitzgerald, 2012 February 01
Everything is done by computer, and every withdraw from a customer account goes to another account are monitored. How can the trustees ... not find who illegal hit the keyboard to make the computer withdraw from customer accounts.
Most of the transactions from segragated accounts in the last few days that are deemed to be potentially illegal, were traced to the English MF subsidiary or other banks in the U.K. Money travels further than just from point A to point B, and then suddenly "stopping." That's why bankruptcy court authorised the hiring of law firm in the U.K. for investigation and representation for clawback of illegal transfers. It's going to take a while, and expenses are going to be substantial.
The bankruptcy judge is paying a truckload of money for accountants and lawyers.
Yes, that's a very lucrative line of business. Just look at Irving Picard, a Madoff's estate clawback trustee who already billed more than half a billion dollars for his firm by suing everyone in sight under the bogus "knew or should have known" / "wilfully blind" legal premise for which he has no enforcement power and has already been rebuked more than once by bankruptcy court judge.
Ref: Madoff trustee claims Mets owners were 'wilfully blind' to Ponzi scheme but loved profits - NYP, by Mark Decambre, 2012 February 11
From: Madoff victim helping those who lost money with New Mexico swindler - NYP, 2012 February 19
While many of the lawsuits are against big money investors and accused insiders who made huge profits over the years with interest rates of 20 percent or more on loans to Vaughan's real estate company, others go after much smaller investors, including one case that seeks to regain just over $4,000 in interest earnings from a $10,000 investment. The suits claim the victims knew or should have known the rates of return were unrealistically high. While some have settled the claims, others say they are being victimized twice. ..... < snip > A noted New York lawyer and Ponzi scheme victim of Bernie Madoff has signed on to help victims of a New Mexico swindler fight a flurry of so-called claw-back lawsuits that seek to recapture some of the $75 million lost by 600 investors around the country. More than 100 suits had been filed by the end of last week as the trustee for the bankruptcy case of Doug Vaughan worked to meet a deadline Wednesday for making any claims against people who may have profited from their investments in promissory notes with Vaughan and his Vaughan Company Realtors.
The real problem is it may very well be that what MFG did was perfectly legal. For instance, if you have a margin account - you have borrowed from your broker - the broker can legally pledge 140% of what you have borrowed of your assets held in the account (in the US, in England, it is unlimited). And if MFG offered the assets as repo's, apparently the lender owns the pledged assets upon declaration of insolvency by the counter party.
Actually, not really. While both the client and the broker may legally "pledge" more capital than they have on their own accounts ("on margin") that doesn't transfer one dime more than that from segregated customer account to the broker... Neither does CFTC Rule 1.25 or "hypothecation". Money is not missing due to the legal use of customers' "margin accounts," it's missing because of illegal commingling by MFG of the customers' funds for their own trading accounts to cover MFG's margin calls, increased capital requirement demands from regulators and redemptions.
If that were the case, nobody would have money in the "margin account" and risk "legally" losing money to their broker gambling with their money. And, to date, nobody has lost the money simply by having the "margin account" at other brokers or investment firms (including bankrupt, like much larger Lehman Bros.), before Jon Corzine and his "band of brothers" at MFG stole (OK, allegedly illegally transferred) the money from segregated customers' accounts, to cover their own margin calls and redemptions.
The laws specifically state that it is illegal, the type of account ("cash" or "margin") doesn't figure into it. As a matter of fact, it is legal responsibility of the firm to cover the settlement if/when the customer can't cover the margin on his bet, (presumably) because the firm should have mnonitored and adjusted (raised) the margin requirements for the account, not the other way around.
For details, see: MF GLOBAL CONTINUES TO UNDERMINE THE US FINANCIAL MARKETS & THE RULE OF LAW - FR, post #22, 2012 February 15 / WSJ, by Patrick Fitzgerald, 2012 February 01
I am not sure what you are saying with your excellent post. My take on your post is that (you claim) the comingling of customer funds with firm funds was the crux of the problem. I fully agree. MFGlobal is/was completely at liberty to make whatever harebrained bets they wish. And yes, it is true that nobody lost any money with Lehman, and as far as I know, with the other commods broker who blew up some time ago (whose name escapes me at the moment) But if and when the SHTF and customer funds are sucked into MFs’ margin calls, then there is a widespread perception (whether true or not by black-letter law, I do not know) that the CME should step in and make whole the “vics”. The ground got kicked out from under that misperception in a big fat hurry.
When you say it’s a non-story, it’s not clear what you are dismissing. Very few expect Corzine to end up behind bars, as he is a major 0bama contributor/bundler and can undoubtedly afford massive legal defense. There is the Jon Corzine story, there is systemic integrity story, there is an “international bankster theft” story, and there are the multiple under-the-radar stories of serious damage/destruction to small and medium farmers and the like scattered across the country who have been smashed by this episode. There is the hit that investor confidence has taken as evidenced by very noticeably reduced trading volumes in the stock and commodity markets. And there is one more story, and it is utterly tacit, but should another one of these events happen, the results could and would, IMO, be quite profound for general investor confidence. US markets have a way of forgetting about these events, but the case can be made that if you are an IB for customer accounts and you see this, you cannot remain in that position and maintain a proper fiduciary status. I am sure you’ve heard of the actions of Ann Barnhardt in this regard. SomeShe just flat out shut down her brokerage. One might regard this as extremism on her part, but I am sure you know that when these things happen, they do so with stunning rapidity.
I believe the depth of reporting within the WSJ is in general miles above that of other media sources, but there is little mention of the financial damage done to small and medium farmers and meat producers that you and I will never hear about.
Without getting into a whole alternate universe of discussion, the grain elevators acted as some sort of hybrid clearing house/banker for farmers before the depression. They would issue spendable credit to the farmers who delivered commodities of proper spec to the elevator. The whole thing collapsed, however, when the folks who were supposed to pay the grain elevators could not pay. Whether it was from a lack of actual currency (which happened) during that time or because general credit collapsed is yet another facet of that particular saga.
Exactly. Without it, it would be just another routine bankruptcy or relatively small brokerage, egg on Corzine's face, but that's about it... Or the company would have been sold to a larger entity (as it was prepped to be, to IBG, before they learned of missing customer funds) and there would be no public story at all, except possibly some bad blood between Corzine and IBG head honcho. This is not a 2008, worldwide "systemic" event or "failure" some are trying to portray, to score a bailout.
... then there is a widespread perception (whether true or not by black-letter law, I do not know) that the CME should step in and make whole the "vics".
Perception should not supercede reality just because it may be "widespread" and this one is not even really widespread beyond just a few people who want to be bailed out by any "big pocket" they can find (JPM, CME, SIPC, taxpayers etc.) and who are trying, by way of manipulation in the "off-Wall-Street" media, to create a perception of "systemic" and worldwide "market failure" just because there was a breaking-and-entering (into "untouchable" segregated accounts) by a known, if "respectable," thief.
Terry Duffy of CME has already stepped in and put up all the money needed to reimburse the farmers and small "vics" that got caught in the theft the CME had no part of (the rest are from foreign exchange accounts that didn't go through CME) - meaning, the CME has already done more than they should have rightfully been expected to do, precisely because it affected farmers and small personal and business accounts. To do anything more would not be righteous and would present moral hazard, everybody should eventually get their money back through the lawsuits, clawbacks, insurance etc. It will take time and proof of having the funds in the account at the time of MF failure.
Most accounts have been transferred immediately to other brokerages, the segregated customers are first in line to receive any further funds recovered from MFG, civil and criminal investigations into MFG, Corzine and his henchmen are continuing by several regulatory and other agencies, so misleading headlines that incite fear and stupid (OWS type) reactions are not really helpful.
When you say it's a non-story, it's not clear what you are dismissing.
The story titled "No MF Global customer cash in JPMorgan account: trustee (RAT Corzine not behind bars yet)".
Based on headline, most people [would] think that the above story is about the brokerage accounts under SIPA and James Giddens authority, while the story is really about MF Global Holdings bank account, which is being wound down by Louis Freeh, i.e., totally unrelated to Corzine's shenanigans with segregated accounts. In other words, a non-story.
... there are the multiple under-the-radar stories of serious damage/destruction to small and medium farmers and the like scattered across the country who have been smashed by this episode.
I believe the depth of reporting within the WSJ is in general miles above that of other media sources, but there is little mention of the financial damage done to small and medium farmers and meat producers that you and I will never hear about.
Not just under-the-radar, there have been stories in WSJ and elsewhere in serious press about the impact on farmers and hedgers and small business account holders. Nobody is minimizing the financial and psychological affect on these people. Yet the overall amount is miniscule, nearly three quarters of the money has already been disbursed (so the remainder comes down to less than $10K per account, on average) and the nature of the theft is well understood, so there is no reason to sensationalize it and blow it out of proportion as a "systemic" or "widespread" or "confidence-shattering" or "market failure" or "system failure" as some in the "financial yellow press" are attempting to do.
We can and should have sympathy for the victims of Corzine's theft, without making it, in the style of 60 Minutes, a hysteric wholesale condemnation of a "failed system" or "widespread confidence crisis" etc. etc. and an advocacy for more rules and regulations or other government involvement, which is what it will come down to, and what they seem to expect. (Speaking of which, any surprise that MF Global / Corzine victims aren't on a tear-jerker 60 Minutes episode?) LTCM was 50 times bigger than MFGH when it failed, and did have a lasting impact on confidence in derivatives and leverage, but nobody seriously blamed the "financial system" for the mistakes of a three Nobel Prize winning economists, even when the financial system itself was in serious trouble.
If anything, by doing this they are only causing harm to themselves and other "vics" because this, in a way, may only create a perception that no crime has been really committed (you saw some forms of that on the thread already, that what was done was perfectly "legal") and that Corzine is not guilty of theft / "misappropriating" of customer funds - hey, it's a "system / CME / CFTC / JP Morgan's / somebody's failure"...
Very few expect Corzine to end up behind bars, as he is a major 0bama contributor/bundler and can undoubtedly afford massive legal defense.
He has the best lawyers money can buy, but so what? That's expected. It would not be the defense side that matters there. There's also a double whammy, Sarbanes-Oxley, which he himself was helping draft and push forth, that he will be subject to. Besides, the biggest danger for him will be civil liability and recovery suits, few of which have already been filed. He is not having a good time.
Corzine's cut-rate condo - NYP, by Paul Tharp, 2012 January 31
Jon Corzine's view from the top just got a lot cheaper. The scandal-hit former MF Global chief has put his penthouse condo along the Hudson on the block for $2.9 million. That's a 12 percent drop compared to the $3.3 million he paid for his high-end Hoboken bachelor pad just three years earlier. ..... < snip > ..... He's been staying in the Manhattan apartment of his wealthy wife, Sharon Elghanayan. < snip >
There is the hit that investor confidence has taken as evidenced by very noticeably reduced trading volumes in the stock and commodity markets.
First, I didn't see all that much reduction in trading volume, although the flows into bonds, bond funds and mutual funds have increased. Second, several stock market (indexes) are at or near multi-year highs and bull/bear ratios and indicators are up and "fear" indicators are down, so the investor confidence is hardly low (that maybe a trouble in itself, according to contrarians but the sentiment didn't seem to have taken a hit. Third, there are so many serious reasons and for reduction in trading and and/or investors' confidence (like uncertainty over Greece/EU/Euro or budget woes in the U.S., Iran/Middle East tensions, increases in oil/gasoline prices, ongoing mortgage mess, uncertainty over potential for higher taxes and fees, political/silly season and so on and so on) that putting MFGH/Corzine story at the forefront of anything related to current financial or economics developments is just not realistic.
If there was/is/will be the loss of investors confidence, MFGH story will be the last on the list of reasons for it. I see big guys and small guys allocating more money into different financial instruments, including trading stocks and commodities (including gold, "paper" and physical), without giving a moment's thought about "systemic danger" of their sizeable funds being stolen by the brokerages, and with good reason - MFGH incident is the exception, not the rule, and everybody understands it, no matter how much ZeroHedge/TBI or financial "yellow journalism" websites try to flame the fears of "it can happen to you..."
I am sure you've heard of the actions of Ann Barnhardt in this regard.
Yes, I have, and I have been very critical of her and others' rants in this regard, for the reasons I have described above. Resorting to a hysterical sensationalism and threats of "boycotting Wall Street or exchanges" to blackmail them into bailing out the "vics" is on the level of OWS, unbecoming to serious investors and managers. Also, how about the hypocrisy of these people who didn't see the necessity for temporary liquidity injected by the Fed and the Treasury during the very real credit crunch and liquidity crisis in 2008, calling it a "bailout" of Wall Street (even though trillions of dollars of Main Street money accounts were at stake and loans were not giveaways and have been repaid, and many on Wall Street were actually making money betting on destruction of these banks), but now they try to resort to extortion so that some "big pocket" (they don't care which one) would make them whole because they were victims of theft?
At least, in this case, she has a good chance at being made whole later, from insurance, clawbacks and lawsuits. Would Ann do better than that if she kept the gold bars in her safe and someone stole it when she and her pink AK-47 were out celebrating New Year or something? Would the "system" be at fault? After all, don't we have the laws against theft, so shouldn't "somebody" pay for this?
The only thing their activity may lead to would be more rules and regulations and fees, by politicians, to "prevent a widespread systemic failure" (as Debbie Stabenow attempted to hijack and redirect from Corzine during the Senate hearings) which would only lead to more expensive and restricted trading and hedging environment for all. Is that really what we want?
See my other posts and rants on this subject:
MF GLOBAL CONTINUES TO UNDERMINE THE US FINANCIAL MARKETS & THE RULE OF LAW - FR, post #22, 2012 February 15 / WSJ, by Patrick Fitzgerald, 2012 February 01
Liquidation Of Customer Stored Gold And Silver Bullion From MF Global - FR, post # 79, 2011 December 18
LIVE THREAD: Corzine testifies before Senate Agriculture Committee: C-SPAN3 - FR, post #77, 2011 December 13
>The Entire System Has Been Utterly Destroyed By The MF Global Collapse - FR, post #82, 2011 November 18
Regulator: MF Global shifted millions last week (may have tried to avoid detection) - FR, post #16, 2011 November 03
They would issue spendable credit to the farmers who delivered commodities of proper spec to the elevator. The whole thing collapsed, however, when the folks who were supposed to pay the grain elevators could not pay.
Exactly. Don't you think things today are generally much more transparent, safer, liquid and better, the MF Global / Corzine incident notwithstanding. If anything, maybe people will look more carefully who they are dealing with, and make sure the company they deal with has extra insurance against malfeasance and/or bankruptcy (as every brokerage does, including MFGH) by the likes of Lloyd's of London/Society of Lloyd's, Aon, Munich Re et al.
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