CFTC charges Corzine in MF Global collapse

Thu Jun 27, 2013 7:23pm EDT
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By Douwe Miedema

WASHINGTON (Reuters) - A top U.S. regulator charged former MF Global chief Jon Corzine over the collapse of the futures brokerage, blaming the former Goldman Sachs co-chief executive with being a key actor in one of the country's 10 biggest bankruptcies.

The Commodity Futures Trading Commission said on Thursday it will seek in a civil case to ban Corzine and former Assistant Treasurer Edith O'Brien from the industry, and also seek penalties against the two.

"Mr. Corzine is charged with being more than a passive actor in the downfall of MF Global," CFTC enforcement head David Meister said on a call with journalists. "He lacked good faith and ... violated his supervision obligations."

The CFTC also settled with MF Global Inc, which agreed to pay a $100 million penalty and funds still owed to customers, but will continue to pursue MF Global Holdings Ltd.

The futures brokerage collapsed in October 2011 under the weight of aggressive bets on European sovereign debt, after Corzine - a former New Jersey governor and U.S. senator - sought to transform the brokerage into a global investment bank.

But investors quickly lost confidence in the company's health when the European economy weakened in the middle of 2011, asking MF Global to put up more money to secure the trades, and causing its remaining cash to rapidly vanish.

Customers were left reeling after it was discovered that about $1.6 billion was missing from their accounts and that the company had used the money to stop gaps in its business, which unlawful and caused a political fire storm.

"This is an unprecedented lawsuit based on meritless allegations," said Andrew Levander, a lawyer for Corzine. "Mr. Corzine did nothing wrong, and we look forward to vindicating him in court," he said.   Continued...

Former MF Global CEO Jon Corzine testifies before a House Financial Services Committee Oversight and Investigations Subcommittee hearing on the collapse of MF Global, at the U.S. Capitol in Washington, December 15, 2011. REUTERS/Jonathan Ernst