MF Global Holdings, Ltd. Files for Bankruptcy Protection
MF Global Holdings, Ltd. is the holding company of the broker-dealer entity that was led by Jon Corzine, the former Goldman Sachs Group Inc. co-chairman and former New Jersey governor. MF Global Holdings filed for Chapter 11 bankruptcy protection in late October 2011. The company is trying to reorganize within the bankruptcy system, after it made imprudent investment decisions surrounding the European debt market. Unfortunately, the debtor made a fatal $6.3 billion gamble on bonds of very indebted European countries.
In addition to the resulting bankruptcy filing, MF Global Holdings became the subject of increased regulatory scrutiny and received a downgrade in its credit rating. While the holding company is attempting to reorganize in bankruptcy, MF Global Inc., the broker-dealer entity is liquidating within bankruptcy.
Debtor MF Global Holdings the Subject of an FBI Investigation
A formal investigation by the FBI of MF Global Holdings was initiated during the first week of November 2011. Apparently, decisions to start the investigation were made late in the day on Nov. 3, 2011, or possibly on Nov. 4. The FBI is working in tandem with U.S. Attorneys on the investigation, at least in its initial stages of inquiry. At present, no informational requests have been issued by the government to MF Global Holdings. It is also significant to note that Mr. Corzine resigned from MF Global Holdings on that same significant date of Nov. 4, 2011. Further, it is not surprising that the former co-chairman has lawyered up and hired defense counsel.
Potentially Serious Misconduct Probes Conducted Against Officers of MF Global Inc.
The officers and directors of the brokerage entity MF Global Inc. are going to be served with subpoenas by a bankruptcy trustee. This probe is related to allegations of potentially serious misconduct on the part of those company leaders, with regard to the management and treatment of customer accounts and funds. One of the main problems was apparently the shortage in collateral held for the company's segregated accounts.
The bankruptcy case is assigned to U.S. Bankruptcy Judge Martin Glenn. Judge Glenn recently commented during a New York hearing that the case's standing bankruptcy trustee, James W. Giddens, is permitted to share materials gathered during his investigation with other governmental bodies. Namely, Judge Glenn has authorized Trustee Giddens to share documents, records, and deposition testimony with the Securities and Exchange Commission (SEC), as well as with the Commodity Futures Trading Commission. Judge Glenn is equally concerned that the bankruptcy trustee must be given sufficient leave to conduct his probe of MF Global Inc.'s management without having any obstructions created by the parent entity.