Jon Corzine might not know where the money is, but somebody certainly does.
James Giddens, the trustee overseeing MF Global's liquidation, told the Senate Banking Committee on Tuesday that he has now accounted for the $1.6 billion in customer funds that went missing following the brokerage firm's collapse, adding that his analysis "is substantially concluded," CNNMoney reports. Giddens team has been tracking down the funds ever since MF Global became the eighth-largest bankruptcy in U.S. history last October.
Giddens additionally pushed for broader restrictions on actions like those taken by the brokerage firm. The trustee argued for the creation of an insurance fund that would protect customers if a similar event ever occurred in the future, The New York Times reports. “With such a fund in existence," Giddens said, "three-quarters of MF Global’s commodities customers would not have been subject to any loss and could have been made whole within days of the bankruptcy filing."
Some action has already been taken by regulators in an attempt to ensure such a situation never repeats itself. The so-called MF Global rule, approved in December, will curb the use of customer funds within the brokerage industry.
The news likely comes to as a relief to many nervous MF Global customers, who could only watch as former MF Global CEO Jon Corzine testified shortly after the firm’s collapse that he "simply [did] not know where the [lost customer] money" was. As recently as January, it was thought that the money may have simply “vaporized,” following a Wall Street Journal report. In February, news came that large portions of the money had been traced to banks like JPMorgan Chase in the United Kingdom, as well as to other customer's accounts.
But soon after those reports, it was additionally found that a MF Global employee received approval to move $165 million of the company's funds from one of its accounts to another in a single minute, further raising suspicions that the firm may have inappropriately moved customer money in an effort to avoid collapse.
Even if the money has been found, it remains to be seen whether all of it will be returned in full to MF Global customers, although so far Giddens has recovered about 80 percent of customer losses, according to CNNMoney. That's of particular concern to the large portion of MF Global clients that are farmers, since their livelihoods in many cases depends on the restitution of funds.
It's unlikely that federal authorities will bring criminal charges against MF Global executives in connection with the lost funds. Giddens, for his part, has said he supports civil fines against Corzine and others.
Here is a timeline of MF Global's collapse:
James Giddens, the trustee overseeing the liquidation of MF Global, told the Senate Banking Committee in April that $1.6 billion worth of lost customer funds had been found and his analysis <a href="http://www.huffingtonpost.com/2012/04/25/mf-global-missing-customer-money-accounted-for_n_1452128.html?ref=business" target="_hplink">"is substantially concluded,"</a> CNNMoney reports.
In a big turning point for the brokerage firm, in 2010 MF Global Holdings hired Jon Corzine, a former chief executive at Goldman Sachs, former U.S. senator and former Governor of New Jersey. Corzine returned to the financial industry after losing his gubernatorial reelection bid to Chris Christie in 2009.
Jon Corzine made risky moves in his mission to turn MF Global into a big Wall Street player. After a period of aggressive trading didn't earn the profits Corzine had hoped for, the firm delved into the foreign debt market, making $6.3 billion worth of large and heavily leveraged bets on distressed sovereign debt in troubled European countries like Spain and Italy.
Europe's economy continued to melt. MF Global investors panicked when they caught wind of the billions in leveraged bets, and on Oct. 31 MF Global filed for bankruptcy. It was called the first American financial casualty of the European debt crisis.
During the firm's collapse, federal regulators discovered that $630 million in customer money couldn't be accounted for. A federal investigation ensued, and forensic accountants found the amount was actually closer to $1.2 billion. Experts suspected the client money was used inappropriately for company purposes.
The investigation shed light on Jon Corzine using his personal influence in Washington to lobby against restrictions on how firms can invest customer money.
On Nov. 4, four days after the firm filed for bankruptcy, Jon Corzine voluntarily stepped down. He had not been accused of any wrongdoing.
In early December federal regulators adopted the 'MF Global rule' to prevent other firms from using client funds to buy sovereign debt. Regulators restricted the transaction that allowed MF Global to borrow money from its own customers.
On Dec. 8 Jon Corzine testified before Congress on the missing money. Speaking to his former colleagues in the Senate, Corzine said he was "stunned" by the missing client funds. He offered an apology but said, "I simply do not know where the money is."
Corzine testified that he didn't know any customer money was missing until the day before the firm filed for bankruptcy. But a financial executive<a href="http://www.huffingtonpost.com/2011/12/13/jon-corzine-testimony-_n_1146192.html?ref=business " target="_hplink"> claimed</a> Crozine "was aware" of a $175 million transfer from customer accounts to a European affiliate of the firm.
Ex-CEO Jon Corzine allegedly authorized the transfer of around $200 million in customer funds to pay down an overdraft just days before the firm collapsed, <a href="http://www.bloomberg.com/news/2012-03-24/mf-global-s-corzine-ordered-funds-moved-to-jp-morgan-memo-says.html" target="_hplink"><em>Bloomberg</em></a> reported in February.
MF Global executives <a href="http://www.huffingtonpost.com/2012/03/28/mf-global-hearing-executives-millions-customer-funds_n_1386701.html" target="_hplink">denied having significant knowledge of an authorized transfer of around $200 million</a> in customer funds to avoid an overdraft. Edith O'Brien, an executive who wrote an email about the transfer at the time, <a href="http://www.huffingtonpost.com/2012/03/28/former-mf-global-executive-edith-obrien-5th-amendment_n_1386210.html" target="_hplink">invoked the Fifth Amendment</a>.