27 February 2012

Feds Key In on $325 Million Wire Transfer Made in Last Hours of MF Global

I wonder if this newly released MF Global information is some of the data that the creditor team has been examining and only recently released to Federal investigators.

It was surprising to hear that JPM as a creditor gets to decide how and when customers can have information about their MF Global accounts as reported here.

The truth may come out some day, but will be heavily coated in sugar. They will try to drag this out until the public loses interest and becomes distracted by something else.

A last minute wire transfer of a large cash amount, not to mention a transfer almost certainly involving customer money, would be an automatic clawback in any bankruptcy I have ever heard about. I saw a trial balloon floated out a week or so ago that put forward the theory that the money would not be returned because it was protected by a 2005 bankruptcy law regarding the sanctity of 'commercial paper' payments.

That rationale might work in a friendly court, but would establish an unbelievable precedent about the ability of banks and insiders to seize funds from the carcass of any failing enterprise ahead of other creditors.

Keep in mind that customers who had requested their money DAYS before the 31st were sent checks instead of the customary wire transfers which they had requested, and those checks were not honored. And I have heard of at least one instance where a customer's wire tranfer was reversed a day later by the banks, which I had thought was not even possible.

This looks like a fraudulent conveyance, and possibly a conspiracy of theft of customer money amongst financial insiders as MF Global slid into bankruptcy.

The more I hear about this, the more outrageous it gets.

Investigators Scrutinize MF Global Wire Transfers
February 26, 2012, 9:07 pm

Federal investigators examining the final days at MF Global and how customer money went missing are poring over scores of wire transfers in and out of the brokerage firm, including the possible movement of $325 million that may have belonged to customers, according to people briefed on the matter.

The suspicious transfer, which until now has not been made public, was first discovered in the early hours of Oct. 31, the day the firm filed for bankruptcy. Initially, the firm attributed a shortfall of more than $1 billion in customer money to an “accounting error,” records show. But after hours of searching, executives acknowledged to regulators in the firm’s offices in Chicago that the shortfall was real — and may have been caused in part by the $325 million transfer, said one of the people briefed on the matter.

It remains unclear where that money went, or even if it belonged to customers. (Did they lose the receipt?  LOL - Jesse)  But it is one of many significant wire transfers that federal authorities — including the Commodity Futures Trading Commission and the Federal Bureau of Investigation — have spent months reviewing to piece together MF Global’s final days.

Investigators have also reviewed another transfer, of $220 million on Oct. 31, which represented a last-ditch attempt to patch the hole discovered in the customer accounts.

Once the firm disclosed the shortfall to officials from the C.F.T.C. and the CME Group, the giant exchange that also regulated the firm, MF Global shifted $220 million in customer money from the securities side of the business to its commodities brokerage unit, where the shortfall in client cash was discovered earlier.

Ultimately, the final attempt came up short. Just hours after the transfer, the firm filed for Chapter 11 bankruptcy...

Read the rest here.