MF Global caused a fit of panic on October 31st after federal regulators discovered that hundreds of millions of dollars in customers' money was missing from the company's vaults. In a last ditch effort to redeem themselves, MF Global, headed by Jon S. Corzine, the former New Jersey governor, attempted to seek an agreement to sell a majority share of the company to a rival brokerage firm. Unfortunately for the company, the deal fell through, and they were forced to file for bankruptcy instead. An immediate investigation ensued to discover whether MF Global used customer's funds to support its own trades to bail itself out of bankruptcy (Protess). .
As the investigation continued, it came to light that incorrect bookkeeping might be the cause of the missing money. Originally, federal investigators believed that $950 million was missing from the MF Global accounts, but now they believe less than $700 million are unaccounted for. While the alarming amount of missing money is gradually getting better, the investigation may uncover a few of MF Global's closet skeletons (Protess).
No matter what the federal investigators uncover in the coming days, the fact that MF Global intermingled customers' money with company funds breaks a fundamental rule of Wall Street regulations. Although Corzine has not been accused of any wrongdoing just yet, as head of the brokerage firm, it is his duty to assess and manage customer accounts each and every day (Protess). .
"It's kind of considered the third rail of the brokerage industry that when you're holding your customers' funds in their names, you don't touch them - even in an emergency situation when you're running short of cash," said Darrel Duffie, a Stanford University Graduate School of Business professor (Brush). .
Corzine originally took the head job at MF Global after unsuccessfully running for re-election in New Jersey's elections for governor.