MF Global Holdings Ltd. filed for bankruptcy protection on Monday following some bad decisions on euro zone debt. MF Global’s meltdown in less than week is the biggest U.S. casualty in the European debt crisis. The filing of bankruptcy by MF Global makes it the seventh largest bankruptcy filing in history. It has been referred to as a “mini” Goldman delving into risky trades involving Italy, Portugal, and Spain.
Shares of MF Global plunged last week as its credit ratings were cut to junk. Bankruptcy filing for Chapter 11 came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday.
It’s being reported that some of its customer accounts that are supposed to be segregated and protected from the rest of the business had suffered what regulators described as “possible deficiencies.” On Monday, MF Global informed the SEC. “Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm,” the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement.
The discovery that money could not be located may reflect sloppy internal controls at MF Global. It is still unclear where the money went. As much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday. Additional funds are expected to come in over the next few days. Analysts are worried the investigation, which is in its earliest stages, may uncover something more intentional and troubling.
The investigation threatens to tarnish the reputation of Jon S. Corzine, the former New Jersey Governor and Goldman Sachs chief who oversaw MF Global’s demise.
Trading of MF Global shares have been halted.