MF Global May Have Hid Recent Fund Transfers: CME

CME Group, the main exchange regulator of bankrupt brokerage MF Global Holdings, said it appears that any transfer by the broker of its customer-segregated funds happened after a CME audit last week, and may have been designed to avoid detection.

CNBC.com Jon Corzine

"With respect to the apparent shortfall in customer segregated funds held by MF Global ... it appears that any transfer of such funds occurred following the completion of CME audit procedures respecting such funds and in violation of [Commodity Futures Trading Commission] regulations and CME rules," CME

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[CME  Loading...      ()   ] said on Wednesday.

"It now appears that the firm made subsequent transfers of customer-segregated funds in a manner that may have been designed to avoid detection," CME said. MF Global "did not disclose or report such transfers to the CFTC or CME until early morning on Monday, October 31, 2011."

MF Global, run by former Goldman Sachs CEO and New Jersey governor Jon Corzine, had a $633 million shortfall in its customer segregated funds as of Nov. 1, according to an estimate CME provided to the U.S. futures regulator. That amounted to an 11.6 percent deficiency.

In a letter dated Nov. 2, the CFTC said the CME has identified futures commission merchants willing to accept transfer of MF Global customer segregated account positions of retail and institutional customers.

The futures regulator also said CME anticipates that MF Global customer-segregated account positions will be transferred to two or more of five identified clearing members.

MF Global, which filed for bankruptcy protection on Monday, is the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

CME said on Wednesday that last week's review indicated that MF Global was in compliance with a requirement for the broker to segregate customer funds from its own funds.

MF Trustee to Begin Transferring Customer Accounts

On Wednesday, a bankruptcy judge approved the transfer of certain customer accounts to rival brokers.

Judge Martin Glenn gave trustee James Giddens the go-ahead to find willing brokers to take on the roughly 48,000 commodities positions of MF Global Inc's customers cleared through the Chicago Mercantile Exchange.

Accounts cleared through other exchanges may also be transferred if those exchanges are willing to work with the trustee to find brokers to take them on, James Kobak, an attorney for Giddens, said at an emergency hearing in U.S. Bankruptcy Court in Manhattan.

The transfer process will unfreeze positions with a notional value of $100 billion, the trustee said.

Giddens sought Wednesday's emergency hearing as a deadline draws near for frozen customer accounts to begin being liquidated. Kobak said accounts must be transferred by Monday morning or face liquidation. The transfer plan is supported by MF Global Holdings Inc, the brokerage's parent company currently in bankruptcy. The Securities & Exchange Commission and CFTC also support the plan.

Obama Campaign may Return Cash From Corzine

President Barack Obama's re-election campaign would return the donations made by embattled MF Global chief Jon Corzine if he were charged with any wrongdoing, a campaign official said on Wednesday.

Corzine, who is at the center of a storm over the securities company's bankruptcy this week, has been a major fundraiser for Obama, having donated the maximum of $5,000 that an individual can give for a presidential campaign, according to campaign finance records.

He also held a lavish $35,800-a-head fundraising dinner for Obama at his home in April and raised or "bundled" donations of at least $500,000 so far for Obama's 2012 re-election effort.

An Obama campaign official, speaking on condition of anonymity, said the donations received from Corzine as an individual would be returned if civil or criminal charges are brought against him.