Even With Securities Lawsuits Over MF Global’s $1.6 Billion Customer Funds Loss, Don’t Expect Criminal Charges

The criminal probe into brokerage firm MF Global’s collapse and its inability to account for approximately $1.6 billion in customer funds will likely end with no criminal charges filed against anyone. Sources involved in the case are reportedly saying that investors are finding that not fraud, but “porous risk controls” and “chaos” caused the money to go missing.

At the time of MF Global’s bankruptcy filing almost 10 months ago, then-MF Global CEO Jon S. Corzine apologized to everyone saying that he also didn’t know what happen to the money. Meantime, thousands of customers saw their assets frozen.

According to a report by bankruptcy trustee James Giddens’, the brokerage company improperly used customer money that they are forbidden to tap so that it could stay in business and meet margin calls. Yet, still, is no one likely to be charged with wrongdoing?

The reason that the criminal probe appears to be winding down is that, per The New York Times, there is the “most telling indication” of federal authorities now looking to interview Corzine to find out more about what was going on at MF Global. (Corzine is also a former governor of New Jersey and an ex-head of Goldman Sachs.)

“We have lamented in the past about the lack of criminal charges being brought against big shots on Wall Street but this may be the most absurd example yet!” said Shepherd Smith Edwards and Kantas, LLP Founder and Securities Lawyer William Shepherd. “Of course, Mr. Corzine is not only well-connected through his financial connections but he is also well-connected politically. That gives him not one but two ‘get out of jail free’ cards to play in the all to real Wall Street game of ‘Oligopoly.’”

Corzine, however, isn’t completely out of the woods in that he, along with other ex-MF Global executives, are being sued by the firm’s customers for securities fraud. Also, regulators may still choose to pursue civil enforcement actions against them.

Meantime, in a decision that could lead to even more securities fraud complaints over the MF Global’s collapse and the missing customer funds, Giddens has consented to work with plaintiffs’ lawyers. Although he won’t be one of the plaintiffs, he will “assign” his legal claims to these attorneys and be a full participant in the cases. Giddens will be responsible for disbursing any money that is recovered. A spokesperson for the bankruptcy trustee said that they believe this proceeding will be faster and more efficient than if Giddens were to file his own lawsuit. Meantime, plaintiffs with MF Global securities cases are seeking class action status.

Per Giddens’s office, Other MF Global securities defendants in the civil suits include ex-CFO Henri Steenkamp, ex-COO Bradley Abelow, General Counsel Laurie Ferber, and other ex-directors and firm officers. Giddens believes that there were MF global directors and officers that caused, helped, or authorized for the customer funds be drawn from segregated accounts to fulfill “proprietary debts” even though they knew this was wrong.

No Criminal Case Is Likely in Loss at MF Global, New York Times, August 15, 2012

MF Global Trustee to Join Existing Suits Against Executives, The Wall Street Journal, August 15, 2012

Criminal charges unlikely for MF Global execs, CBS News, August 16, 2012

More Blog Posts:
$1.2 Billion of MF Global Inc.’s Clients Money Still Missing, Stockbroker Fraud Blog, December 10, 2011

MF Global Shortfall May Be More than $1.2B, Says Trustee, Stockbroker Fraud Blog, November 26, 2011

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012