MF Global in CME Investigation, Admits Diverting Funds

MF Global Holdings (MF) has been in a tailspin lately. In mid-September, MF announced it would “its equity sales, sales trading and research staff in Europe and Asia by more than 30% as it makes the transition into a commodities-focused investment bank.” Then, MF filed for bankruptcy protection.MF Global Files Bankruptcy, CME Group Steps In

According to the Wall Street Journal, MF Global “collapsed into bankruptcy Monday when a potential buyer bolted over a discrepancy of hundreds of millions of dollars in the beleaguered securities firm’s books.” It continued, “U.S. regulators are investigating the discrepancy, which relates to money from customers that couldn’t be accounted for as MF Global raced to sell itself, according to people with knowledge of the probe. The probe is at an early stage, and it isn’t clear if the money is missing or if the inconsistencies relate to sloppy bookkeeping.”

CME Group Inc

“Because of the company’s dire condition when trading opened Monday, CME Group Inc., the owner of the Nymex and the Chicago Mercantile Exchange, blocked traders working for MF Global or backed by the securities firm from buying and selling,” wrote the Wall Street Journal. CME cracked down so hard on MF, “some of their security cards were deactivated as they left the trading pits in Chicago.”

CME Investigates MF Global

CME was prompted to investigate MF Global after the accounting discrepancies were brought to light. CME’s chief executive Craig Donohue said “While we are unable to determine the precise scope of the firm’s violation at this time, we are investigating the circumstances of the firm’s failure,” according to the New York Times. That investigation took a sharp turn after “MF Global Holdings Ltd. admitted to federal regulators that money had been diverted out of customer accounts, according to a federal official who said the move violated the law,” reports the Wall Street Journal. “Regulators are still working to determine whether MF Global had a continuing problem with handling customer funds or if executives diverted funds as the company’s financial situation deteriorated and grew more desperate.”