Last year, in October 2011, MF Global, Inc. (“MF Global”), one of the world’s leading financial derivatives, futures and commodities brokers, collapsed after engaging in extremely risky proprietary trading involving European sovereign debt and repo trades. After the failure of MF Global, the United States Department of Justice launched a criminal investigation to determine whether the firm’s officers and directors were involved in the misallocation of approximately $1 billion in customer funds that lead to the firm’s collapse. The criminal investigation has transpired for nearly 10 months, and it has been reported that investigators will most likely conclude that internal chaos and inadequate risk controls lead to the disappearance of customer funds, not fraud. Department of Justice investigators invited Jon S. Corzine, former chief executive officer of MF Global, to a voluntary interview which is expected to take place next month. Reportedly, when prosecutors have sufficient evidence to support criminal charges, they typically do not extend an offer for a voluntary interview, as was done here. Since Mr. Corzine was invited to a voluntary interview, it is not expected that criminal charges will be filed against him. Although Mr. Corzine may not face criminal charges, he has suffered irreparable damage to his reputation on Wall Street. It is suspected, however, that criminal investigators are focusing their attention on MF Global lower level employees, including, but not limited to, Edith O’Brien, the firm’s “keeper of the books.” Ms. O’Brien was tasked with overseeing the transfer of customer funds during the time MF Global customer funds could not be accounted for. Notably, Ms. O’Brien refuses to cooperate with the authorities without receiving immunity from criminal prosecution. Although distributions have been made to former MF Global customers by the SIPC Trustee, none of the customers are expected to recuperate 100% of the value of their account. As such, many customers want justice to prevail and see that the wrongdoers are held accountable for their involvement in the loss of the customer funds and the collapse of MF Global. It will be interesting to see how the Justice Department concludes its investigation, and which officers and directors, if any, will be criminally charged.
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