As Federal investigators continue reviewing MF Global's last days of business and the mystery of its missing customer money, one action that is causing them to scratch their heads is a $325 million transfer. According to The New York Times, the money may have belonged to customers.
The transfer in question came from the morning of Oct. 31 when the firm filed for bankruptcy. MF Global had reported a $1 billion shortage in customer money and attributed it to an “accounting error” but after further reviewing it, regulators in the firm's Chicago's office had been told the shortage was reality.
It may have partially resulted from a $325 million transfer.
What happened to the money and who it belonged to still remains unanswered but it is currently under review by the Commodity Futures Trading Commission (CFTC) and the Federal Bureau of Investigation.
Second Questionable Wire Transfer
Investigators also have their eye on a second questionable wire transfer: a $220 million one from Oct. 31. This may have been a last ditch effort by the firm to cover up the missing funds in the customer accounts.
According to The New York Times, the firm did tell the CFTC and CME Group ((NASDAQ:CME) about the shortage and then moved the $220 million of customer money from its securities side to its commodities brokerage arm--the place where the shortfall in client cash had been found.
But it was too late as the firm subsequently filed for bankruptcy.
In addition, the $220 million questionable transfer opens a can of worms as it has commodities customers, who are missing the $1.6 billion, and the CFTC going up against the Securities and Exchange Commission, who oversaw the firm's securities side of the business.
Both sides will want the money for their respective sides.
Attorneys and regulators have been trying to find the missing $1.6 billion in customers for months. Currently about two-thirds of it has been returned but the cash in overseas customer accounts remains missing. According to the trustee in charge of returning customer cash, close to $700 million is sitting in Britain.
The Chicago Office
Investigators have expressed frustration about what took place with the firm's Chicago office employees during the final days and now they are focusing on those involved in treasury and finance. This office also oversaw customers' funds held in commodities.
Christy Vavra, manager of MF Global's treasury operations, has spoken to investigators regarding transfers executed for customer accounts in the final days. Hundreds of millions of dollars in customer money have been traced by investigators to numerous places: one included a $165 million transfer to JPMorgan Chase and additional ones to the firm's equities customers and trading partners.
At issue is that MF Global violated a key Wall Street rule: customers' money is never mixed with the firm's.
Edith O’Brien, a senior official from the Chicago office, has not cooperated with investigators as a possible source of information about the transfers. She has asked for immunity, according to The New York Times, before she'll speak with authorities.
A third name that has popped up from the Chicago office is Christine Serwinski, MF Global's North American chief financial officer. Her knowledge of the transfers isn't alot as she was away from the firm in its last week; however, she returned on the evening of Oct. 30 and allegedly was involved in developing a “contingency” plan for customer accounts, according to CME.
All three of these names became public after former MF Global CEO Jon S. Corzine testified before Congress in December and cited them for their involvement. They have not been accused of any wrongdoing.