MF Global loss may be double the initial estimate

posted at 4:00 pm on November 22, 2011 by Ed Morrissey

Earlier, investigators probing the records of MF Global expressed some optimism that they could locate some of the $600 million that appeared lost from customer accounts.  Their job just got twice as difficult, the New York Times reports, as the amount missing may have doubled to $1.2 billion:

The amount of customer money missing from the collapsed trading firm MF Global may be more than $1.2 billion — double previous estimates — the trustee dismantling the firm’s brokerage unit said on Monday.

But the surprise finding, which caught regulators off guard, may be overstated, according to a person briefed on the investigation. Some regulators say they believe that the trustee double-counted $220 million that had been transferred between units of MF Global, this person said.

Still, the much higher number highlights the disarray of MF Global’s records and raises significantly the hurdle for tens of thousands of customers seeking to get their money back. The trustee’s estimate represents a significant portion of customer funds held by MF Global.

Whatever the final number, investigators now know it will be much higher than the first estimate, which came from MF Global itself:

But after weeks of reconstructing MF Global’s books, forensic accountants from Deloitte and Ernst & Young working for the trustee concluded that the account shortfall was much greater than originally estimated. Regulators have yet to verify the new numbers. While they are expected to raise their estimate above $600 million, it is unlikely to reach the trustee’s $1.2 billion figure.

So far, it looks like the trustee of the brokerage unit’s bankruptcy says he can only reimburse 60 cents on the dollar on the customer losses:

MF Global Inc.’s shortfall in U.S. segregated customer accounts may be as much as $1.2 billion or more, said the trustee overseeing a liquidation of the failed brokerage.

James Giddens, the trustee, said today that distributing 60 percent of what should have been in customers’ accounts will take $1.3 billion to $1.6 billion, or almost all of the assets he has within his control. While he expects the transfer will occur in early December, he doesn’t have access to funds beyond $1.6 billion, Giddens said in a statement.

“He is very close to exhausting the funds under his control,” according to the statement, which noted that the amount of assets the trustee can access are different than the amount of the shortfall. Recovering funds from foreign depositories may take more time, Giddens said.

MF Global Holdings, the parent company, has asked for an outside trustee for its bankruptcy proceedings apart from Giddens’ work on the brokerage unit — under pressure from major creditor JP Morgan Chase.  As the Chicago Tribune notes, JPMC has agreed to fund the outside trustee, which is an unusual step, and one that suggests that the creditor smells a rat:

JPMorgan Chase & Co , a member of the creditors’ committee, said it would provide $26 million to keep MF Global afloat in bankruptcy if the company agrees to appoint a trustee, according to the filing.

Such an outside administrator is rare, and is reserved for cases in which a bankrupt entity’s executives are accused of wrongdoing, or when it is in the estate’s best interest.

JPMC is also bidding for a significant piece of MF Global’s assets, so its interest in the bankruptcy exists on more than one level.  The question will be how much MF Global will actually have worth buying, and whether customers will ever see the rest of their money that should never have disappeared in the first place.

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Thank you President 0bama and Jon Corzine!

– crr6

UltimateBob on November 22, 2011 at 4:08 PM

Gerald Celente is one of the MF customers that got screwed.

https://twitter.com/#!/geraldcelente/status/135086033044901888

Mark1971 on November 22, 2011 at 4:08 PM

“… and one that suggests that the creditor smells a rat:”

As in Democrat

Seven Percent Solution on November 22, 2011 at 4:08 PM

Amazing how MF just made that money “disappear” without any human involvement.

Any bets that Eric Holder won’t find much to be concerned about?

GarandFan on November 22, 2011 at 4:08 PM

So far, it looks like the trustee of the brokerage unit’s bankruptcy says he can only reimburse 60 cents on the dollar on the customer losses:

The customers suffered theft losses. They were robbed. The Company accessed funds that were never to be touched. These weren’t stockholders whose equities just took a 40% nosedive because they guessed wrong on a stock, and they never intended to become “creditors” to the Company. This is you and I suddenly discovering our bank accounts were 40% “lighter”. Many people need to be confined, and their assets frozen.

Neo-con Artist on November 22, 2011 at 4:12 PM

It was an inside job designed to confiscate the wealth of commodities speculators in a cheap attempt to hide our run away inflation.

No bonus points for guessing who made mention of the dangers of Fed fueled inflation about a year ago.

abobo on November 22, 2011 at 4:15 PM

Things could be worse. Instead of ripping off MF Global, Corzine could have ripped off the entire State of New Jersey.

At Thanksgiving, let’s be thankful for Chris Christie.

Steve Z on November 22, 2011 at 4:15 PM

Some regulators say they believe that the trustee double-counted $220 million that had been transferred between units of MF Global, this person said.

This sounds very odd to me. You don’t just lose and then find $220 million dollars. I mean we’re talking about hundreds of millions of dollars here. You simply don’t just ‘lose’ it and then ‘find’ it again. You lose your keys and then find them, but not this sort of cash.

sharrukin on November 22, 2011 at 4:15 PM

“This is no big deal. Enron and Halliburton did much worse!”

/bayam

Del Dolemonte on November 22, 2011 at 4:16 PM

The missing $ has probably been bundled and sent to Oranizing for America in Chicago

shanimal on November 22, 2011 at 4:23 PM

First Guy We Called for Economic Advice Was Jon Corzine. ~ Joe Biden

Fallon on November 22, 2011 at 4:23 PM

So in Obama’s America Corzine walks?

Iblis on November 22, 2011 at 4:23 PM

In their last 10-K, the CEO and CFO both certified that they were “responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting”.

Now you hear that the records were “sloppy”.

Since the outside auditors had to audit these “internal controls” under SOX 404, I wonder what they have to say about this, and why hasn’t the Trustee initiated a lawsuit for professional malpractice against the audit firm??

Neo-con Artist on November 22, 2011 at 4:23 PM

Funny how other people’s money just “disappears” whenever Obama and his boyz show up!!!

landlines on November 22, 2011 at 4:23 PM

As with the OWS excesses, you’ll know the Democrats and the media think it’s all over for Corzine when they start distancing themselves from him and pretend he never was a Democratic governor or senator from New Jersey. And by the time the trial starts, they’ll be pretending he doesn’t even exist.

jon1979 on November 22, 2011 at 4:25 PM

So far, it looks like the trustee of the brokerage unit’s bankruptcy says he can only reimburse 60 cents on the dollar on the customer losses

Gues they’ll be hoping for what little change is left.

Tim_CA on November 22, 2011 at 4:25 PM

At least 3/4 of that 1.2 billion will be used for Obama’s relection campaign. Bank on it … Corzine will go untouched.

darwin on November 22, 2011 at 4:27 PM

Paging the SEC and the PCAOB, here’s a classic multi-billion fraud case to prosecute. This is the whole reason SOX 404 was established. Hello?!?! Oh, silly me, we need more regulation to prevent simple theft.

Neo-con Artist on November 22, 2011 at 4:27 PM

I find it extremely interesting that neither MF Global or Corzine have been charged with anthing yet. Whats up with that? I know that Holder has politicized the DOJ and all, but the optics here are incredibly bad.

A thought for consideration maybe.

With Corzine being a “good Progressive” and the OWS scourge being the darling of the progressive Nomenklutra in their desire to dismantle Capitalism. How would a man in Corzine’s position at MFG due his utmost to assist in that dismantlement? Wouldn’t sabotaging the confidence and faith in the markets be best thing he could accomplish in aiding his progresive bretheren? Rather than being motivated by trying to save his firm by accessing client accounts to cover it’s positions, could this be a 5th column action in the belly of of capitalism itself.

Perhaps absconding with $1 Billion + is just the cherry on top of the dessert of rocking the markets to their core.

Jussayin….

Archimedes on November 22, 2011 at 4:28 PM

“Hey John, how did you get caught so quickly??”

-Bernie Madoff

portlandon on November 22, 2011 at 4:30 PM

Could anyone expect *anything but* a royal screw job by a mainstream Dem ex-gov of a blue state and a company named M. F. Global?

The War Planner on November 22, 2011 at 4:31 PM

Woo hoo can’t wait for Thanksgiving and my numnutz relatives to try and school me about the Solyndra, F&furious, and this issue being “non” stories. Good thing they invented whiskey to help me.

arnold ziffel on November 22, 2011 at 4:32 PM

Fallon:

“First Guy We Called for Economic Advice Was Jon Corzine. ~ Joe Biden”

You know, I actually believe him. Could be a first for the Obama Administration.

AnonymousDrivel on November 22, 2011 at 4:33 PM

Woo hoo can’t wait for Thanksgiving and my numnutz relatives to try and school me about the Solyndra, F&furious, and this issue being “non” stories. Good thing they invented whiskey to help me.

arnold ziffel on November 22, 2011 at 4:32 PM

Careful…..you may have a stroke trying to keep from busting out in unrestrained, righteous Laughter!!

Tim_CA on November 22, 2011 at 4:36 PM

*paging Bernie Madoff*

SouthernGent on November 22, 2011 at 4:37 PM

Amazing how MF just made that money “disappear” without any human involvement.

GarandFan on November 22, 2011 at 4:08 PM

Obama Moneybomb

jdkchem on November 22, 2011 at 4:39 PM

Paging the SEC and the PCAOB, here’s a classic multi-billion fraud case to prosecute. This is the whole reason SOX 404 was established. Hello?!?! Oh, silly me, we need more regulation to prevent simple theft.

Neo-con Artist on November 22, 2011 at 4:27 PM

Someone left the irony on again…

He co-authored the Sarbanes-Oxley Act…

Seven Percent Solution on November 22, 2011 at 4:41 PM

This is something you would expect to see in a banana republic.

visions on November 22, 2011 at 4:42 PM

Visa, Mastercard and American express untraceable gift cards for illegal democrat donations are going to be a huge hit this year. I would recomend a buy on those stocks that can profit from this activity.

astonerii on November 22, 2011 at 4:44 PM

the trustee double-counted $220 million that had been transferred between units of MF Global

And how exactly does double counting $220 million lead to a doubling of $650 million?

Ed, little technical times there: “JP Morgan Chazse.”

WitchDoctor on November 22, 2011 at 4:45 PM

Seven Percent Solution on November 22, 2011 at 4:41 PM

Oh that just rich!! Maybe they should have named it SOX-COX…

Neo-con Artist on November 22, 2011 at 4:57 PM

Get a rope.

Mike Honcho on November 22, 2011 at 5:05 PM

jon1979 on November 22, 2011 at 4:25 PM

But they will need Frank Rich to make the case that Corzine was actually a Republican.

sirnapsalot on November 22, 2011 at 5:25 PM

What a coincidence, just the amount Barry was hoping to collect for his campaign. Bet if you divide that amount into $50 increments, that’s exactly how many “small” donors will contribute on-line via unverified credit card donations.

GarandFan on November 22, 2011 at 6:35 PM

Come on folks what is a measly 1.2 billion compared to the 800 billion looted from our pockets. Nothing to see here move along. /s

chemman on November 22, 2011 at 7:32 PM

I’ll bet CC is looking pretty good now, eh NJ. Corzine was just showing the way for all the rest of the crooks in DC. This is how the country will go down. All the money will disappear down a demonrats hole and the doj will take another trip outta the country. It’s all play money anyway since it was made in China and everything Bamster does has an expiration date.

Kissmygrits on November 23, 2011 at 8:53 AM