Jon Corzine, the former CEO Jon Corzine together with other former executives of MF Global Holdings settled the lawsuit filed by investors.
MF Global Holdings went bankrupt in 2011 after its bad bets on European sovereign debt. Investigators found that the firm illegally transferred customers’ assets, and there was a $1.6 billion shortfall in their accounts, which were supposed to be separated from MF Global’s funds.
The investors of MF Global filed a lawsuit against Corzine and other former executives of the firm claiming that they must be accountable for the collapse of the firm.
The Virginia Retirement Systems and the Province of Alberta in Canada were among the investors that filed a case against the former executives of MF Global.
The investors claimed that the former executives inflated the ability of the firm to manage risks, obscured the risks related to Corzine’s $6.3 billion bet on European sovereign debt, and improper accounting for deferred tax assets.
In 2013, Louis J. Freeh, a former FBI director and trustee of MF Global Holdings said Corzine committed negligent conduct as CEO of the firm. According to him, Corzine and his team practice trading strategies with minimal oversight and they failed to improve faulty controls despite receiving warnings.
Details of the settlement between Corzine and investors
Corzine and other former executives of MF Global agreed to a $64.5 million settlement with investors. The settlement boosted investors’ recovery of assets to $204.4 million including $74.9 million from underwriters and $65 million from PricewaterhouseCoopers.
The lawyers representing the investors said the $204.4 million recovery represents 18% of the maximum reasonably possible. According to them, it was an excellent result given the fact that MF Global went bankrupt.
J. Randy MacDonals, Henri Steenkamp and seven former independent directors of MF Global were part of the settlement. All of them denied wrongdoing.
MF Global ordered to pay $100 million penalty
Last year, the Commodity Futures Trading Commission (CFTC) obtained a court order against MF Global. The court ordered that firm to pay a $100 million penalty and to pay $1.2 billion in restitution for unlawful use of customer funds.