Forum Post: Theft, RICO lawsuit targets MF Global, CME Group, MorganChase /// Customer Protest of CME Group & JPMorgan Has Begun /// CFTC & CME Regulated Futures System is Defaulting on its Obligations /// CME Did -NOT- Guarantee Oversight in MFGlobal Scandal
Posted 12 years ago on Dec. 15, 2011, 12:03 p.m. EST by MonetizingDiscontent
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BREAKING: Theft, RICO lawsuit targets MF Global, CME Group, MorganChase
http://www.gata.org/files/MFGlobalClassAction-01-12-2012.pdf
(((See article here))) http://www.gata.org/node/10875
-January 12, 2012-
Dear Friend of GATA and Gold:
Our friends at the Philadelphia law firm of Berger and Montague this week brought a class-action lawsuit in federal court in New York, charging theft and misappropriation, against people connected with the failed commodity brokerage firm MF Global, including its former CEO, former New Jersey U.S. Sen. and Gov. Jon Corzine; MF Global's enabler and supposed regulator, CME Group; and the investment bank JPMorganChase. The lawsuit is brought under both the Commodity Exchange Act and the Racketeer-Influenced Corrupt Organizations Act -- the famous RICO. (Maybe the lawsuit can determine where MorganChase put Judge Crater.)
The lawsuit's complaint is posted at GATA's Internet site here:
http://www.gata.org/files/MFGlobalClassAction-01-12-2012.pdf
Customer Protest of CME Group And JPMorgan Has Begun
-Jan 04, 2012-
Unlike the stock market, the futures market has all of its contestants directly in competition with one another; every contract is essentially a bet between two parties. In the wake of MF Global (MFGLQ.PK) however, competitors stand unified in collective disgust, but more action must be taken. Here is the latest from the battlefield.
The CFTC is inept, and the CME is haplessly squirming, having punted on covering MF Global customers due to short-term shareholder obligations. After pouring through news articles, I want to encourage everyone to read Erin Arvedlund’s piece in Barron's, "The Silver Rush at MF Global." http://online.barrons.com/article/SB50001424052748703856804577098740322633760.html ....It’s a great take on just how viciously property rights have been stampeded in this process. Much of this sordid tale has come out recently when the Congressional hearings featuring Jon Corzine gave the story a well-deserved boost in the spoon-fed media. We broke this story early in Minyanville.... (see MF Global: Is This the Second Coming of Bernie Madoff? http://www.minyanville.com/businessmarkets/articles/mf-global-mf-global-bankrupt-mf/11/1/2011/id/37705 ) ....and we indicted all the right culprits—senior management at MF Global, the CFTC, the CME Group, and a little bank called JPMorgan (JPM). http://finance.minyanville.com/minyanville/quote?Symbol=JPM
(((Continue Reading this article Here))) http://www.minyanville.com/businessmarkets/articles/mf-global-mf-global-bankruptcy-mf/1/4/2012/id/38681
MF Global debacle triggers calls for CME changes
-27 December 2011-
CFTC and CME Regulated Futures System is Defaulting on its Obligations
The Silver Rush at MF Global
http://online.barrons.com/article/SB50001424052748703856804577098740322633760.html
http://finance.yahoo.com/news/the-silver-rush-at-mf-global-.html
-December 19th, 2011-
Investors are furious that they can't get back the gold and silver they stashed with the failed brokerage.
It's one thing for $1.2 billion to vanish into thin air through a series of complex trades, the well-publicized phenomenon at bankrupt MF Global. It's something else for a bar of silver stashed in a vault to instantly shrink in size by more than 25%.
That, in essence, is what's happening to investors whose bars of silver and gold were held through accounts with MF Global.
IT'S STILL UNCLEAR WHETHER CME will put its commodity-futures customers first—or its shareholders.
The company has set aside a $550 million reserve for MF Global customers, and it has cash balances of more than $1.1 billion that it could tap, if needed.
But CME Group's chief operating officer, Bryan Durkin, said last week that CME wouldn't guarantee the funds that remain missing from customer accounts at MF Global after they are reimbursed by the bankruptcy trustee. Such a move would be "unwise" and the CME has a "fiduciary responsibility" to its shareholders, Reuters quoted him as saying."
In congressional testimony last week, CME Executive Chairman Terrence Duffy pinned the blame squarely on MF Global, asserting that Corzine knew that untouchable, segregated customer funds had been used as collateral for loans. Corzine later denied Duffy's charge.
(((Read the entire article Here))) http://finance.yahoo.com/news/the-silver-rush-at-mf-global-.html
GeraldCelente:
CME Did -NOT- Guarantee Oversight in MF Global Scandal
It is very suspicious that weeks prior to MF Global’s fall billionaire investors like the Koch brothers had the miraculous foresight to withdraw all their money, prompting accusations that big players got a ‘heads up’... http://www.huffingtonpost.com/daniel-dicker/the-koch-brothers-and-mf-_b_1089906.html ...in advance of the firm’s collapse.
CME is now in the process of damage control. Earlier today (Nov 17th) the organization issued a press release... http://www.marketwatch.com/story/cme-group-statement-on-mf-global-segregation-violation-2011-11-17 ...stating “that it followed CFTC requirements and CME Rules and procedures in reviewing MF Global’s segregated funds statements and coordinating that review with the CFTC” and characterized reports that it was negligent as “inaccuracies.”
Terrence Duffy's Introduction at CME Group Press Conferecne with Mayor Daley. Announes $100 Billion in Collateral As They are “the guarantor of every transaction that happens in our markets”
((WATCH This))) http://www.youtube.com/watch?v=m3XpfPXxjbw&feature=player_embedded
Trends forecaster Gerald Celente, who lost gold futures at MF Global in the six figure range, has discovered a video of CME Executive Chairman, Terrence Duffy, (Above Link) holding a press conference last year in which he unequivocally states that no “customer has ever lost a penny as a result of a clearing member default that CME Group.”
Duffy admits that CME is the “guarantor of every transaction that happens in our markets (and) we have to guarantee the performance of each and every one of these contracts.” Obviously, this was not the case with MF Global and its clients.
The CME boss claims in the video that the futures and options markets provide “a place of shelter for the most damaging parts of the economic crisis” and “function flawlessly, providing liquidity, transparency and central counterparty clearing services that continue to work throughout the crisis,” a claim that turns out to be entirely fallacious, as Celente and others discovered after MF Global went belly up.
Duffy proudly admits that CME is “the guarantor of every transaction that happens in our markets” and guarantees “the performance of each and every one of these contracts which means facilitating the transfer of $800 trillion of risk. To do this, we hold more than $100 billion of collateral to support the transactions that are being done on our markets.”
However, as Gerald Celente notes, not “only have customers lost money, they’ve lost their futures positions. Secondly, and more important, CME did not honor its ‘guarantee’” to MF Global’s clients.
“This is big news that nobody has uncovered, and I’d like to break it, says Celente.
It is not certain at this point if CME’s role in the scandal will be highlighted. Authorities are attempting to track down MF Global client money lost in JP Morgan’s black hole and two “aggressive and high-profile federal prosecutors,” according to the Wall Street Journal... http://blogs.wsj.com/law/2011/11/17/the-am-roundup-mf-global-subpoenas-prop-8-more/ ...are using subpoenas to gather MF Global records.
Trustee to Seize & Liquidate Even the Stored Customer Gold and Silver Bullion From MF Global
http://jessescrossroadscafe.blogspot.com/2011/12/attempt-to-seize-and-liquidate-customer.html
-December 17th, 2011-
The bottom line is that apparently some warehouses and bullion dealers are not a safe place to store your gold and silver, even if you hold a specific warehouse receipt. In an oligarchy, private ownership is merely a concept, subject to interpretation and confiscation.
Although the details and the individual perpetrators are yet to be disclosed, what is now painfully clear is that the CFTC and CME regulated futures system is defaulting on its obligations.
This did not even happen in the big failures like Lehman and Bear Sterns in which the customer accounts were kept whole and transferred before the liquidation process...
(((Continue Reading this article Here))) http://jessescrossroadscafe.blogspot.com/2011/12/attempt-to-seize-and-liquidate-customer.html
Max Keiser & Gerald Celente
Discussing the Relationship Between JPMorgan and MFGlobal... and CME's Terrance Duffy who was Bragging a Year Ago, that they are the Guarantor of -ALL- Trades that go on, in the Commodities Market Exchange. (Where's the money Duffy?)
(((WATCH Here))) http://www.youtube.com/watch?v=GCo2q4gsbNI&feature=player_embedded#!
-December 17th, 2011-
Max Keiser: "In the US there are limits to how much that a fund can hypothicate. They can leverage up to 140% of customer funds, if in fact it's backstopped with AAA rated -lets say- Treasury Paper"
Here Are 3 Suspicious Involvements JP Morgan Has Had With The MF Global Case So Far Commodity Customer Coalition founder James Koutoulas is requesting that MF Global bankruptcy Judge Martin Glenn investigate three potential legal issues that are said to have occurred in transferring of MF Global assets. The key issues include the fact that JP Morgan was able to purchase MF Global bonds at a discount without any open bidding process and the assets were apparently sold without disclosure to or approval from the U.S. bankruptcy court or trustees. The third issue centers on JP Morgan seeking special favors from the Federal Reserve to receive priority treatment over investor segregated fund accounts.
The first such non-transparent movement of assets occurred when JP Morgan is said to have purchased MF Global’s Sovereign Debt at a significant discount without an open bidding process, paying $0.89 and later selling that debt to investor George Soros for $0.95. No one is going to complain about JP Morgan generating profit. However, purchasing assets of a bankrupt firm without an open bidding process or disclosure to the bankruptcy court and trustees is where JP Morgan may be in trouble, according to Mr. Koutoulas. This sale could be subject to clawback provisions, legal experts speculate. (On December 9, 2011 The Wall Street Journal reported the fact that bonds were moved to KPMG London office, which was the bankruptcy administrator, but at the time the article did not discuss sale details or approval through the bankruptcy process. See "Corzine's Loss May Be Soros's Gain" by Gregory Zuckerman and Dana Cimilluca.)
The key issue is that such transfers is the bonds were purchased at a discount without open bidding and the process was not disclosed to or authorized by the U.S. Bankruptcy Court, according to Mr. Koutoulas. “Who gave JP Morgan permission to purchase those bonds at a discount without open bidding?”
The second questionable movement of assets is said to have occurred when JP Morgan purchased MF Global’s stake in the London Metals Exchange (LME) without proper disclosure. The event was widely reported at a basic level on November 28, 2011. The larger issue, however, appears to center on the fact that such a transaction was not approved by the U.S. bankruptcy court and trustee.
“Was this disclosed in court?” Mr. Koutoulas rhetorically asked. “No. Was their trustee approval? No.”
The third issue occurred in congressional testimony Thursday, December 15, 2011 where it was discovered JP Morgan asked the Federal Reserve to write a letter claiming that the segregated funds should not be categorized as client money.
“How many letters like this have they asked for in the past? I want all the statistics regarding the number and content of letters,” Koutoulas questioned. “JP Morgan wanted a ‘get out of jail free card’ from the Fed. Guess what? That doesn’t fly with me.”
“Their hubris is so severe. They think we don’t know the industry, like we are Occupy Wall Street radicals or something and don’t have a clue or message,” Mr. Koutoulas said, noting that the CCC is comprised of experienced industry participants who understand the financial services industry from the inside.
Mr. Koutoulas seeks to solve the problem with JP Morgan without dragging the issue through court. In speaking to JP Morgan, Mr. Koutoulas said “Listen, you are buying vulture MF Global claims at $0.86 ½ on the dollar. Why don’t you pay a fair price of $0.97 ½ take the customers out of the bankruptcy and we will indemnify you from any class actions resulting from this.” A vulture claim occurs when an MF Global claimant such as a farmer or small business person is in desperate need of cash and sells their claim to someone such as JP Morgan, who purchases the claim at a lower rate than the value at maturity. In this example if JP Morgan purchased the claim at $0.87 and all clients were eventually "made good" JP Morgan would receive the par value of $1.00. With the MF Global bankruptcy proceedings apparently moving along much quicker than expected, JP Morgan stands to potentially make a quick 13% return on such vulture claims.
Mr. Koutoulas reports that JP Morgan would not even discuss the issues. “I can see that you disagree with me,” said Mr. Koutoulas, whose organization represents over 7,000 MF Global clients, mostly professional investors. “They won’t even meet with me and talk with me.”
Mr. Koutoulas is currently working Pro Bono and many of the lawyers are working at a highly discounted rates and requested that industry participants donate to help . “I need professional litigators and bankruptcy attorneys backing me up,” said Northwestern Law School grad Koutoulas who also operates Typhon Capital Management, which is an NFA-registered Commodity Trading Advisor and Commodity Pool Operator. "We've had an outpouring of lawyers who want to help," Mr. Koutoulas said, sitting with a young Yale Law School grad as we spoke.
In calling on MF Global presiding bankruptcy Judge Glenn to investigate these issues, Mr. Koutoulas is rallying the futures industry to boycott use of JP Morgan. “Call your FCM and if they are using JP Morgan say ‘We won’t do business with you if you work with JP Morgan,’” he said, requesting that industry participants get on Twitter and follow the #BoycottJPM hash tag.
Read more: http://go2managedfutures.com/2011/12/non-transparent-transfer-of-mf-global-assets-jp-morgan-questioned/#ixzz1hwpOrdUV
Read more: http://go2managedfutures.com/2011/12/non-transparent-transfer-of-mf-global-assets-jp-morgan-questioned/#ixzz1hwpASWf8
JP Morgan Just Told The MF Global Clients' Lawyer To Close His Bank Account James Koutoulas, a co-founder of the Commodity Customer Coalition—which represents the interests of over 8,000 MF Global customers trying to be made whole in the wake of the brokerage's bankruptcy, has recently spearheaded a movement to boycott JP Morgan and its services.
Koutoulas has repeatedly criticized JP Morgan and its involvement in the MF Global bankruptcy, alleging that the bank has various conflicts of interests in its dealings with the MF Global estate.
Now, it seems like JP Morgan wants him off their back faster than he can close his accounts. Koutoulas has just publicized a letter JP Morgan Chase sent him, requesting that he move his bank accounts to another financial institution.
Koutoulas, who runs a commodity trading advisory firm Typhon Capital, used JP Morgan Chase as the bank account for his trading firm and its holding company Khaos Enterprises. He told Business Insider he was already in the process of closing his accounts with JP Morgan when he received the letter today.
"It's pretty clear why," he told Business Insider when asked about why JP Morgan may have sent the request.
A JP Morgan spokesperson declined comment on the issue because it contains personal information. But the spokesperson told Business Insider that Koutoulas' various claims about JP Morgan's involvement in MF Global's bankruptcy are false and lacking merit.
The letter is signed by Ann Stankiewicz, a vice president within the Executive Office. Here's a copy of the letter: [PDF here]
Read more: http://www.businessinsider.com/jp-morgan-chase-has-requested-the-mf-global-clients-lawyer-close-his-bank-account-after-he-spearheaded-a-boycott-of-the-bank-2011-12#ixzz1hwoYiC00
Read more: http://www.businessinsider.com/jp-morgan-chase-has-requested-the-mf-global-clients-lawyer-close-his-bank-account-after-he-spearheaded-a-boycott-of-the-bank-2011-12#ixzz1hwoPuHl9
::::::::::::[KR235] Keiser Report - Death by Thousand Revelations & MFGlobal::::::::::::
(((Scroll to the 12:35 min. marker in Video))) http://maxkeiser.com/2012/01/12/kr235-keiser-report-death-by-thousand-revelations/
In the second half of the show, Max talks to author, Nomi Prins about the role of JP Morgan in Jon Corzine’s MF Global crime.
::::::::::::The Neverending MF Global Story: Regulators Block The Truth::::::::::::
http://www.forbes.com/sites/francinemckenna/2012/01/09/the-neverending-mf-global-story-regulators-block-the-truth-from-coming-out/
-1/09/2012-
Instead of looking out for MF Global investors – and customers who are still waiting for their money – it looks like regulators and the bankruptcy trustees are busy suppressing information. Instead of full transparency, regulators and the trustees are holding onto crucial details that might tell us all who was asleep at the wheel when the broker/dealer and futures commission merchant (FCM) headed over the cliff.
Bob English, an independent trader and contributing editor to the blog, Economic Policy Journal... http://english.economicpolicyjournal.com/2012/01/scrubbed-mf-global-filing-resurfaces-at.html ...published a post this morning that raises serious questions about the Securities and Exchange Commission’s program of regulation for broker/dealers and, in particular, the agency’s role in keeping the truth from the public about what went wrong at MF Global. We’re also being kept from the truth about other broker/dealers who may be putting risky trades on their books or whose controls over segregation of customer assets may be weak or non-existent.
(((Continue Reading this article Here))) http://www.forbes.com/sites/francinemckenna/2012/01/09/the-neverending-mf-global-story-regulators-block-the-truth-from-coming-out/
::::::::::::::::::::Scrubbed MF Global Filing Resurfaces at the SEC::::::::::::::::::::
:::::::::::But More Questions About Suspicious Filing Practices Surface:::::::::::
http://english.economicpolicyjournal.com/2012/01/scrubbed-mf-global-filing-resurfaces-at.html
Thursday, January 5, 2012
:::::::::::::::::::::::::Did CME Know About MF Global Misdeeds?:::::::::::::::::::::::::
:::::::::::::::::::::::::::::Trustee Will NOT Provide Documents:::::::::::::::::::::::::::::::
http://wallstcheatsheet.com/stocks/did-cme-know-about-mf-global-misdeeds.html/
-January 07 2012-
In another case development that came on Friday, Louis Freeh, ex-Federal Bureau of Investigation director and MF Global’s bankruptcy trustee, said he will not provide the CFTC with some documents that could help them resolve what transpired with the missing customer funds, estimated at $1.2 billion.
Freeh, representing MF’s parent company, utilized the attorney-client privilege to not release the documents, reported the Wall Street Journal. The CFTC is helping with the investigation to determine what happened to the missing firm customer funds.
With the refusal to provide documents, the CFTC believes this could slow down the investigation. They have not commented on Freeh’s failure to provide documents but his office provided the following statement:
(((Continue Reading this article Here))) http://wallstcheatsheet.com/stocks/did-cme-know-about-mf-global-misdeeds.html/
::::::::::::::::::::::::::::::::Trustee Tussles With Regulators:::::::::::::::::::::::::::::::::
http://online.wsj.com/article/SB10001424052970204331304577143133017776526.html
-JANUARY 6, 2012-
(WallStreetJournal) In at least two other instances, disagreements between different investigators have clouded the issue of which clients have a claim on the money remaining with MF Global.
It's C-Span time. Are they under oath? Pepper spray at least.
[Deleted]
Barney Frank is probably worried that the Fannie Mae/Freddie Mac scandals will resurface. They all know what they are covering up, this has been going on for a long time Frank is resigning soon. They are all crooks, some just cover for each other and others pad their pockets or friends pockets. This is big and I hope we finally get some real justice.
The link DOES work. Thanks. I doubt if Corzine will become the scapegoat sacrifice needed, (too many connections), but will provide the tuff question soundbites that will make the hometown voters proud.
Pepper spray as you wish, the PTB would do way worse to us without a hearing. Corzine like Bernanke or Geitner, LOOK at their eyes, it appears like they have no souls to begin with.. I like spray paint better, no permit required :)
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[KR223] Keiser Report: Möbius Strip of Fraud
(((Video))) http://maxkeiser.com/2011/12/15/kr223-keiser-report-mobius-strip-of-fraud/
-December 15, 2011-
Max Keiser & co-host Stacy Herbert discuss re-hypothecating, Alec Baldwin’s cake and eating it too. And, as Al Capone before him, JP Morgan’s Jamie Dimon complains of the thankless task of being a “public benefactor”.
In the second half of the show, Max talks to Reggie Middleton... http://boombustblog.com/ ...about German debt and MF Global.
Transatlantic Legal Tussle Brewing Over MF Global Customer Funds Last update: 12/23/2011 10:17:45 AM
By Jacob Bunge Of DOW JONES NEWSWIRES
Legal authorities unwinding the brokerage operations of MF Global Holdings Ltd. (MFGLQ) in the U.S. and the U.K. could be heading for a legal clash over $600 million to $700 million in customer money that both sides consider to be their responsibility. James Giddens, the U.S. trustee unwinding MF Global's domestic brokerage unit, on Friday disputed the stance of KPMG, which is unwinding MF Global's London-based arm, over the legal classification of the money. "We would hope to resolve it, but this certainly could end up in a U.K. court," said a spokesman for Giddens Friday. The disputed funds do not make up part of the $1.2 billion in customer money that remains unaccounted for, he said. Officials for KPMG were not immediately available for comment. The tiff highlights the lengthy and messy process of returning billions of dollars in customer funds, which has dragged out nearly two months after MF Global's Oct. 31 bankruptcy filing. The effort has been complicated by the estimated $1.2 billion shortfall in customer money that has yet to be fully understood by regulators and investigators, including the Federal Bureau of Investigation. A series of asset transfers has reunited former clients with 72% of the $5.5 billion in property held in U.S. segregated accounts, which had been used to trade on futures markets like the New York Mercantile Exchange and the Chicago Board of Trade. No funds used to back up transactions on international exchanges have been returned yet, according to Giddens' spokesman, and authorities have not settled on just how much money is out there. About 80% of MF Global customer funds linked to non-U.S. trading is seen to reside in the U.K., a hub for trade in metals and contracts linked to short-term European interest rates. Nearly all of the 1.6 million open trading positions of customers have been closed or transferred since KPMG took over as administrator of MF Global's U.K. arm Oct. 31, the firm reported last week, representing more than $1.5 billion in collateral. KPMG aims to carry out its own "interim distribution" of the funds, according to a statement last week from Richard Heis, joint special administrator of MF Global UK for KPMG. Giddens' spokesman said Friday that both Giddens and KPMG see the $600 million to $700 million in question falling under their respective jurisdictions. The picture is clouded because the U.S. and U.K. maintain different bankruptcy and regulatory regimes. If the funds are not secured by Giddens, it would add to the $1.2 billion in client money that so far has proven unattainable, said the spokesman. -By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com --Marietta Cauchi in London contributed to this article. (END) Dow Jones Newswires December 23, 2011 10:17 ET (15:17 GMT)
Barnhardt: MF Bankruptcy Illegally Filed As "Securities Firm" To Give JP-Morgan Priority Status
(((Watch Video Here))) http://www.youtube.com/watch?v=18A698QQex0&feature=player_embedded#!
http://ml-implode.com/staticnews/2011-12-22_BarnhardtMFBankruptcyIllegallyFiledAsSecuritiesFirmToGiveJPMorga.html
-Dec 21, 2011-
:::::::::::::::::::::E-Mail Clues in Tracking MF Global Client Funds:::::::::::::::::::::
http://dealbook.nytimes.com/2011/12/20/e-mail-clues-in-tracking-mf-global-client-funds/
-December 20, 2011-
::::::::::::Celente to Yahoo Finance: "MF Global Is NOT An Isolated" Incident::::::::::::
http://www.youtube.com/watch?v=V2GthPNA-1o&feature=player_embedded#!
Uploaded by geraldcelente on -12/16/2011-
Gerald discusses Terrance Duffy, the CME, and says people are missing the whole CME angle on the MF Global Bankruptcy. Gerald points out that Duffy proudly admitted last year that CME is “the guarantor of every transaction that happens in our markets” and guarantees “the performance of each and every one of these contracts which means facilitating the transfer of $800 trillion of risk. To do this, we hold more than $100 billion of collateral to support the transactions that are being done on our markets.” Here's the video of Terry making this very announcement on television.
::::::::So where's the money Terry?::::::::
((WatchThis))) http://www.youtube.com/watch?v=m3XpfPXxjbw&feature=player_embedded
( ( ( f l a s h b a c k ) ) )
:::::::::CME May Face Liability Related to MF Global Disclosure, Goldman Sachs Says:::::::::
by Matthew Leising and Silla Brush - Nov 17, 2011 4:22 PM ET
http://www.bloomberg.com/news/2011-11-17/cme-may-face-liability-related-to-mf-global-disclosure-goldman-sachs-says.html
CME Group Inc. (CME), http://www.bloomberg.com/apps/quote?ticker=CME:US ...the world’s largest futures exchange that’s fallen more than 9 percent this week, may face liability related to concerns it misled regulators over what it knew about MF Global Holdings Ltd., according to Goldman Sachs Group Inc.
( ( ( f l a s h b a c k ) ) )
:::::::::CME Knew of Shortfall in MF Global Client Funds -BEFORE- Commodity Regulator:::::::::
http://www.dailyfinance.com/2011/12/16/mf-global-who-knew-what-and-when/
-Nov 16, 2011-
In explosive testimony during the House Agriculture Committee hearings on MF Global last week, CME Group (NYS: CME) Executive Chairman Terry Duffy said that at roughly 2 a.m. on the morning MF Global declared bankruptcy, the company told representatives of the U.S. Commodity Futures Trading Commission and CME that "customer money had been transferred out of segregation to firm accounts."
In similar testimony before the Senate on Dec. 13, Duffy said an agency auditor participated in a phone call where an MF Global employee indicated Corzine knew the firm had loaned customer cash to a European affiliate.
Unnamed sources pointed to missing customer funds as early as two weeks after the bankruptcy, but Duffy's testimony represents the first time a high-level executive had gone on record to state definitively that MF Global had commingled accounts. More damaging? The CME knew about it.
But who knew what, and when, goes far beyond executives in a hearing. Customers, introducing brokers, and MF Global traders paint a picture of warning signs and weak-kneed regulators who failed to take action in the days, weeks, and years leading up to MF Global's death. This is a closer look at what they witnessed....
(((Read this Whole article Here)))
http://www.dailyfinance.com/2011/12/16/mf-global-who-knew-what-and-when/
http://www.bloomberg.com/news/2011-11-16/futures-exchange-cme-knew-of-mf-global-fund-shortfall-before-cftc-was-told.html
( ( ( f l a s h b a c k ) ) )
::::::::::::::::::::::::CME Is Legally Liable For MF Global Customer Losses::::::::::::::::::::::::
http://seekingalpha.com/article/306068-cme-is-legally-liable-for-mf-global-customer-losses
-November 8, 2011-
I hope they succeed in going after Corzine,s personal assets. Now if we could only get them to go after the personal assets of the guys who OK'd the CDS deals at AIG , now that would put the brakes on some of the reckless trading real fast.
The farmer in the Dell watches CSPAN (cartoon photo)https://www.facebook.com/photo.php?fbid=2472570648812&set=a.1080658971890.2013564.1088783753&type=1&theater
STOP THIEF! http://maxkeiser.com/2011/12/15/stop-thief/
This is an old article but it really explains the MF trade.( it's in 3 parts) Corzine Pushed Europe Bet to $11.5 Billion By Miles Weiss, Cristina Alesci and Matt Leising - Nov 29, 2011 1:21 PM ET
Jon Corzine bet $11.5 billion on European sovereign debt in his bid to rebuild profits at MF Global Holdings Ltd., almost twice the net amount disclosed to investors, and relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over.
Corzine, who was chairman and chief executive officer of the futures broker before it went bankrupt last month, overcame resistance from directors, senior traders and risk managers to accumulate the bonds, according to two people with knowledge of the situation. He used the hedges, or offsetting trades, to cut the net risk reported to shareholders to $6.4 billion, according to an Aug. 3 regulatory filing by the company.
A former New Jersey senator and governor, Corzine joined MF Global in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs Group Inc., where he had been co-chairman before entering politics. He repeatedly ratcheted up his wager on the debt of countries including Italy and Spain, booking gains along the way, according to filings. The short-term hedges matured before the bonds, meaning the net amount at risk could increase if investors lost confidence in either European sovereigns or MF Global and new hedges couldn’t be bought.
“If that assumption does not come to pass, their risk mushrooms,” said Matthew Pieniazek, president of Darling Consulting Group, a Newburyport, Massachusetts, firm that advises banks on managing their balance sheets. Hedges that matured along with the bonds would have been prohibitively expensive, he said.
Steven Goldberg, a spokesman for Corzine, and Diana DeSocio, an MF Global spokeswoman, declined to comment for this story. ‘My Personal Responsibility’
There was never any doubt about who engineered the sovereign-debt trade.
“Our positions and the judgment about risk-mediation steps are my personal responsibility,” Corzine, 64, said on an Oct. 25 conference call to answer questions about a record quarterly loss and debt-rating downgrade that sliced the firm’s market value that week by 67 percent, or $410 million, as MF Global slid toward collapse.
The firm’s Oct. 31 bankruptcy filing, the eighth-biggest by a public company in the U.S., led to at least 1,066 workers losing their jobs, disrupted commodities markets and undermined investor confidence in futures brokers. The trustee liquidating MF Global’s broker-dealer said more than $1.2 billion in customer money may be missing, and the company is being investigated by regulators and the U.S. Justice Department. Missing Funds
About $200 million of the missing funds have been found at JPMorgan (JPM) Chase & Co., the New York Times reported, citing people briefed on the matter that it didn’t identify. MF Global had an overdrawn account at New York-based JPMorgan in its final days, the newspaper said. The funds were transferred before its bankruptcy filing, it said.
Marie Cheung, a spokeswoman for JPMorgan in Hong Kong, declined to comment today.
U.S. investigators are unaware of any missing funds in the U.K., according to a person familiar with the Federal Bureau of Investigation probe of MF Global’s collapse who declined to be identified because the matter isn’t public. Peter Donald, a spokesman for the FBI in New York, didn’t immediately return an e-mail after business hours seeking comment.
Kent Jarrell, a spokesman for MF Global trustee James Giddens, said in a statement that the $1.2 billion estimate of missing funds is preliminary and may change. He didn’t comment on whether any of the money may be in the U.K.
part 2 Turnaround Strategy
Corzine resigned on Nov. 4, and has hired attorney Andrew Levander, a partner in the law firm Dechert LLP whose clients have included money manager Ezra Merkin in litigation tied to Bernard Madoff’s fraud scheme. Neither Corzine nor anyone else at MF Global has been accused of any wrongdoing.
MF Global reported a loss in the four quarters prior to Corzine’s hiring. Central to his strategy for turning the futures broker around, Corzine promised to bulk up principal trading, or the use of the firm’s own capital to make deals for itself and clients. In the latter half of 2010, within months of taking the helm, he started buying the Italian and Spanish bonds, as well as those of Portugal, Ireland and Belgium.
On earnings conference calls with investors, Corzine described the debt, which matured at various points in 2012, as a low-risk way to profit from “dislocations” in Europe’s sovereign-debt market. To limit its risk, MF Global entered into a minimum of $4.9 billion in offsetting wagers that would pay off if the bonds fell in value, filings with the U.S. Securities and Exchange Commission show. Complicated Disclosure
MF Global’s regulatory filings don’t give dollar amounts for the gross purchases of European sovereign debt or for the hedges. Instead, the investments are shown as percentages of a bigger base of assets, leaving investors to calculate the numbers themselves. Those assets are reported on a market-value basis.
The firm in filings and an October investor presentation disclosed the net amount at risk from its European bonds after hedges. Neither the presentation nor regulatory filings explained that the hedges matured before the bonds and thus would have to periodically be renewed.
MF Global didn’t have any trouble replenishing the hedges through the end of October, when its operations were handed over to trustees, said a person briefed on the matter who asked not to be identified because the information isn’t public. KPMG LLP, whose London office is serving as the special administrator for MF Global’s U.K. unit, said in a Nov. 17 statement that “the overwhelming majority” of the firm’s European sovereign-debt portfolio, along with the related hedges, had been liquidated. Board Pushback
Although the trades didn’t require pre-approval by the board, directors (MF) later questioned Corzine’s investment, according to a person familiar with the discussions. After challenging the size of the bets and the concentration on a small number of countries, the board set dollar limits on the amount of sovereign debt its chairman could buy. Corzine came back to the board at least once to get the ceiling raised.
At multiple meetings, Corzine reassured directors that the trades would work out, said the person, who asked not to be identified because the discussions were private. Corzine said the European countries he selected wouldn’t default before the bonds matured, and that the market was mis-pricing the debt, according to the person. Underpinning Corzine’s view was the euro zone’s European Financial Stability Facility, which could backstop government short-term debt through June 30, 2013. Directors’ Dilemma
Some risk managers and traders at MF Global shared the directors’ concerns, according to a former employee with knowledge of the matter. The risk-management department began asking for daily prices of credit-default swaps on sovereign debt to keep track of how the market viewed the underlying bonds, a second person said.
The demise of MF Global, which was spun off from fund manager Man Group Plc in 2007, shows how Corzine’s stature made it hard for the board or underlings to oppose him, even as the crisis in Europe deepened. Directors believed that rejecting the trades would have been an affront to the veteran trader and would have been tantamount to firing him, said the person familiar with the board’s deliberations.
“This was a board that could not possibly have been more expert in exposure to risk, a board with at least as much, if not more, expertise than the CEO,” said Jeffrey Sonnenfeld, senior associate dean at the Yale University School of Management in New Haven, Connecticut, and founder of a nonprofit educational and research institute focused on CEO leadership and corporate governance. “This was an example of people not having the courage to stand up to the CEO.” Trader at Heart
Even after nine years in politics, Corzine never shook the trading bug. He was a prominent presence on MF Global’s trading floor, frequently leaving corporate meetings to check on the markets, according to one person familiar with the firm. He had a reputation for knowing where prices were minute-by-minute, an unusual level of detail for the CEO of a global financial institution.
“He loved to prowl the trading room,” said Mike Fitzpatrick, a former MF Global oil trader who was recruited by Corzine to work in its principal strategies group, the unit that placed proprietary trades. “I find it hard to believe a trader of Corzine’s experience and longevity didn’t calculate, ‘What’s the worst that could happen?’” said Fitzpatrick, who left MF Global in October 2010.
“It got so far out of hand so fast,” he said. Poor Risk Management
A lack of internal controls eventually doomed the company after a last-minute purchase of the futures-brokerage unit by Interactive Brokers Group Inc. was scuttled when it couldn’t account for hundreds of millions of dollars in customer funds, Hans Stoll, an Interactive Brokers board member, said in an interview earlier this month.
Poor risk management had hurt MF Global before Corzine’s arrival. The company’s shares fell 40 percent in two days in February 2008 after it lost about $141 million on unauthorized wheat trades by an employee in Memphis, Tennessee.
The company sought to tighten its order-entry systems and created a chief risk officer position to calm shareholders. In September 2010, Corzine brought in Bradley Abelow, his chief of staff as governor, to be MF Global’s chief operating officer. Abelow’s duties included overseeing risk management. Eye on Costs
The tension between beefing up internal controls and trying to improve earnings surfaced during a conference call in November 2010. Then-Chief Financial Officer J. Randy MacDonald was asked by an analyst about the company’s non-compensation expenses. MacDonald stressed the importance of building the “middleware” and distribution platforms across the brokerage’s businesses, saying the company had “some investments to make.”
As the analyst moved on to his second question, Corzine interrupted: “Make no mistake, we’re looking to produce earnings now, and we are keeping a sharp eye on costs.” He said he was mindful of ensuring the company didn’t “bite too quickly on running up costs in front of revenue growth.”
Abelow couldn’t be reached for comment.
To execute his European debt trade, Corzine used repurchase agreements, a type of transaction that allows investors to finance most or all of the purchase, depending on the securities involved, the length of the deal and the credit quality of the borrower. In earnings calls, the CEO said the firm was seeking to profit from the difference between the yield it received on the European bonds and the interest rates it paid under the repurchase agreements. Favorable Accounting
Part 3 After setting up the trade so the bonds and the financing agreements matured on the same dates in 2012, accounting rules dictated that MF Global treat the transaction as a sale rather than a collateralized loan. Those rules meant MF Global had to book all of the profit upfront, rather than recognizing it over the life of the contracts, and kept the assets and liabilities from the trades off of its balance sheet, according to Peter Testaverde, a partner in New York at accounting firm EisnerAmper LLP who does audits of hedge funds and brokerages.
The multiple transactions were conceived as a revenue- generation strategy that would improve the financial results for MF Global’s nascent trading unit, according to the person familiar with the board, who wasn’t authorized to speak publicly. Complicated Disclosure
MF Global disclosed in a May 20 filing that its net holdings among the five European countries consisted of $6.3 billion in debt at the end of March that had an average maturity of April 2012. The company said in the Aug. 3 filing that its European sovereign portfolio had risen to $6.4 billion of debt with an average maturity of October 2012. In both instances, MF Global said the figures were “net of hedging transactions the company has undertaken to mitigate issuer risk.”
While reporting its net holdings had increased 2 percent, MF Global had expanded its bets to $11.5 billion as of June 30 from $7.64 billion as of March 31, according to data contained in the SEC filings. The firm didn’t quantify its holdings at the end of 2010. The firm’s hedges, known as reverse repurchase agreements, jumped to $4.93 billion at June 30 from $1.08 billion as of March 31, the data show.
Revenue from the European sovereign trades was about $47 million during the fiscal fourth quarter ended March 31, or 16 percent of net revenue, and $38 million, or 12 percent, in the following quarter, according to an October investor presentation. Beginning of End
“This perspective reinforces our strategic view that diversifying into client dealing and principal trading works to reduce dependence on a single line of business and allowed us to grow revenues even in a difficult environment,” Corzine told analysts during a July 28 conference call.
The deal began to unravel in August when the Financial Industry Regulatory Authority told MF Global to add capital to its U.S. brokerage to back the trades. Then on Oct. 24, Moody’s Investors Service downgraded MF Global to one level above junk status, citing its ongoing inability to meet earnings targets and concern that it wasn’t sufficiently managing risk. The next day, MF Global reported its worst-ever quarterly loss.
By the end of that week, the broker’s credit ratings were cut to junk, its bonds were trading at distressed levels and it had drawn down its entire $1.3 billion revolving credit facility.
Corzine’s strategy may ultimately have proven “very profitable” had the firm been able to hold the trades to maturity, said Josh Galper, the managing principal at Finadium, a Concord, Massachusetts, investment research and consulting firm. The firm’s collapse stemmed from a cash shortage, with trading partners and lenders seeking more collateral after the credit downgrade, rather than actual losses on the bonds, Galper said.
“If MF Global had bought the same trade without leverage, there would have been no issue,” Galper said in an interview.
To contact the reporters on this story: Miles Weiss in Washington at mweiss@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net
MF Global reported a losses long before they hired Corzine. 4 Quarters straight in a row, so I'm confident that there were instances of poor management further back than a year. My point being, where were those rating agencies Then? Why now? They only seem to downgrade after malfeasance is already blatantly obvious.
Its like calling for rain after it starts raining. All the countries that these rating agencies have downgraded, should have been downgraded long before, when the countries were in a better position to deal with it. As it is, it seems like they only attack when these companies are already standing completely naked in public, with no chance of restructuring their debt.
Corzine should be in jail. Maybe the CME should be downgraded too, if they go ahead with a default on their obligations as the guarantor of all trades going on in their markets, as CME's Terry Duffy admitted last year.
Terrence Duffy's Introduction at CME Group Press Conferecne with Mayor Daley. Announes $100 Billion in Collateral As They are “the guarantor of every transaction that happens in our markets”
((WATCH This))) http://www.youtube.com/watch?v=m3XpfPXxjbw&feature=player_embedded
~Where's that 100 Billion in collateral?~
It's the whole theory that banks can self regulate, then our government needs to hire an army of regulators to watch every trade. If MF Global had some rules in place about what leverage or trading they could do within a company that hold accounts for the public they wouldn't have gotten into this trouble. Personally I think companies like that should be broken up and have to do their trading in a separate company.
yes, all excellent points. every one of them, d.c.
Customer Protest of CME Group, JPMorgan Has Begun By John Cassimatis Jan 04, 2012 2:10 pm Futures traders will need to organize more and sacrifice some to save their formerly beloved industry.
Unlike the stock market, the futures market has all of its contestants directly in competition with one another; every contract is essentially a bet between two parties. In the wake of MF Global (MFGLQ.PK) however, competitors stand unified in collective disgust, but more action must be taken. Here is the latest from the battlefield.
The CFTC is inept, and the CME is haplessly squirming, having punted on covering MF Global customers due to short-term shareholder obligations. After pouring through news articles, I want to encourage everyone to read Erin Arvedlund’s piece in Barron's, "The Silver Rush at MF Global." It’s a great take on just how viciously property rights have been stampeded in this process. Much of this sordid tale has come out recently when the Congressional hearings featuring Jon Corzine gave the story a well-deserved boost in the spoon-fed media. We broke this story early in Minyanville (see MF Global: Is This the Second Coming of Bernie Madoff?) and we indicted all the right culprits—senior management at MF Global, the CFTC, the CME Group, and a little bank called JPMorgan (JPM).
The Occupy Wall Street Movement
This group has gotten more heat, quite literally, than an overcooked chicken. They are slammed for not having an agenda, for having long, unwashed hair, for living in a decade that ended over 40 years ago, for having played too much Frisbee as kids. Much of that is true, but they have at least showed one thing that most Americans furious over the decade-long tidal wave of banking and political abuses have not—the courage to take to the street and stay there. They are the building block, that first step, of what may likely become a far more organized and status-quo jeopardizing legion. They are essentially saying that something is wrong, and while they might not know exactly how to fix it, their point is clear: We are not leaving until someone does something. As they continue largely ignored, the great question is whether more organized, politically and economically savvy groups will join their call. Certainly in a sense, the farmers and sophisticated futures traders have paid them a different bit of attention recently, as they have witnessed firsthand a heralded system that has failed them to the core.
The reason the banks always beat the people is that they are far more organized. It takes the people an exceptionally long time to go from complaining about things to actually doing something about it. The Greeks say “It’s terrible” to literally every injustice spoken, and what that means is, "Let’s just enjoy our coffee in peace." Slowly, I think the masses are unifying a touch, or at least there is a collective patience that is eroding away. In the MF Global case, what if every futures customer reduced their trading to just core ideas for a while? Yes, if traders, directly affected or not by MF Global, seriously narrowed the scope of their trading in an organized protest of the Exchange. I refrain from asking traders to completely abandon their strategies and drive for opportunities. It’s unrealistic even though the corruption has clearly weighed on widespread psyches and corresponding risk modeling. A crisis where the wrong precedents emerge and threaten all its actors. If trading volumes dropped by, say, 50% instead of the 10% that has occurred, what would the CME Group (CME) do then? Likely, if players were this organized from the outset, some entity would have engineered a full backstop by now. Perhaps there is something to build on from this Occupy Movement. They have at least showed us a new will for justice.
CCC Protest of JPMorgan
JPMorgan has been eerily involved in some highly shady dealings regarding MF Global. As MF’s major custodian, fund flows ran through the untouchable bank. Customer monies were initially said to be found at JPMorgan, only to be refuted by the bank. Two-hundred million was then located in a UK arm of JPMorgan. Courtside, JPMorgan's lawyers have been trying every tricky maneuver possible to get ahead of pilfered customers on the bankruptcy chain -- another reason CME Group should have provided the necessary backstop to get the Interactive Brokers deal through. Their legal clout could have tackled JPMorgan’s deep-pocketed assault in a fairer battle. Thank God for James Koutoulos and the organized CCC, the Commodity Customer Coalition, which has risen like David against Goliath. Many of us who have endured this confidence-shaking ordeal suspect that JPMorgan, hedging its $1.2 billion unsecured credit exposure to MF Global, bears a great deal of responsibility in the difficulty regulators have had in locating such a large sum of stolen money. Then, there is the reported transaction where MF Global, after the parent company filed for bankruptcy, sold large quantities of Italian bonds to JPMorgan at 89 cents on the dollar, only to be flipped within a day to George Soros funds for 95 cents. The trustee was not informed, nor was there open bidding for the bonds in order to maximize the assets of the estate. Rumors swell that the reason this was permitted was that MF Securities, the broker-dealer unit, had not officially filed yet. However, its customers were shut down. Wires did not go out. Deliveries were not honored by the CME Group. Yes, the case against JPMorgan is growing tighter.
The CCC has called for all futures customers to contact their FCMs, starting with RJ O’Brien, where the majority of MF clients were transferred, to determine if they conduct any business with JPMorgan. If JPMorgan is a custodian, or in any way part of the money flow of the FCM, customers have been urged to switch to FCMs that do not conduct business with such a ruthless entity. I am in full support of this ban, and have sent a letter to my FCM today.
My Pledge
As a former customer of MF Global, I pledge -- if I ever get some capital back -- to be significantly more disciplined about my trades with the Comex. I will only trade "must do" scenarios. I will punt all marginal ideas, all spur-of-the-moment ones, all "shots." Silver margins are now less than 6x leverage, so the search for competing vehicles across the board is on. I’m sure plenty are being imagined in the wake of this crisis. I promise to find some balance between being true to my search for opportunity and being an active contributor in delivering the much-needed message the CME Group has struggled to hear. It cowered because it underestimated the resolve of its customers. On paper, CME took the cheap way out. I truly want CME to regret that decision. When you can’t penetrate its ears, you finally must go for its pocketbooks. Perhaps the Commodity Customer Coalition will join me in furthering its protest, and so will their friends. With a period of disciplined protest, futures traders can, somewhat ironically, put a more directed layer of brick upon the Occupy foundation. That’s the way real change begins.
I had written that I thought the metals would be in a sideways to down mode for a bit, indicating ultimate price targets of 1250-1350 gold and 18-24 silver. The action to this point is supportive of the thesis and has ultimately given me some time away from these financial markets. That, I assure you, has been divine, my best holiday present for sure. It’s tough to trade when all your liquid funds are locked up with a trustee as they remain today. In general, it seems a decent time to have the hands off the keyboard.
Read more: http://www.minyanville.com/businessmarkets/articles/mf-global-mf-global-bankruptcy-mf/1/4/2012/id/38681#ixzz1iXeeYdMy
I hope the "rainmaker" comment makes it to TV. I love political cartoons. If I were talented I'd start an Occupy cartoon post. Who's got the tar and feathers?
It's back on.