Today’s Wall Street Journal (this is a subscriber only article) is reporting that MF Global Holdings Ltd. shifted hundreds of millions of dollars in customer funds to its own brokerage accounts in the days before its bankruptcy filing. That is illegal.
The article reports:
“If they used client moneys to meet house margin calls, that’s a misuse of client funds,” said Ronald Filler, a law professor at the New York Law School.
According to the Commodity Exchange Act, customer funds at futures commission merchants “shall not be commingled with the funds of such commission merchant or be used to margin or guarantee the trades or contracts…of any customer or person other than the one for whom the same are held.”
Commodity Futures Trading Commissioner Scott O’Malia said earlier this week that it “appears that MF Global failed this fundamental responsibility.”
The New York Post posted a story yesterday with the title, “These guys want Corzine in prison.” The writer of the article talks about the impact of what was done at MF Global on four commodities traders he refers to as Eeny, Meeny, Miney, and Moe.
The article reports:
All of them were stung hard — not only because their money at MF disappeared overnight but also because they couldn’t even get on the floor of the exchange to conduct business.
Their IDs had been revoked.
Up to 30,000 of MF’s customers worldwide are said to be unable to access money they had in so-called “segregated” accounts at the company. And with the bankruptcy court and a trustee now involved, that money could be locked up for a long time.
“I want to see jail. I want to see one of these guys go to prison,” Moe said, with Eeny, Meeny and Miney nodding in agreement. “They destroyed lives because they wanted to make money. No more fines and Club Fed. People need to pay” with jail time.
Corzine, who took over the sleepy brokerage firm after being defeated for a second term in the statehouse, is the one they hold most responsible.
I think it’s time to take a good look at the way we treat ordinary people who break the law and extremely wealthy people who break the law. I am sure we will be hearing more of this story in the future.