MF Global fund frustration grows, CFTC confirms probe

Thu Nov 10, 2011 5:52pm EST
 
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By Nick Brown and Christopher Doering

(Reuters) - IntercontinentalExchange Inc on Thursday added its voice to an anguished chorus of commodity traders calling for MF Global's bankruptcy court to release billions of dollars in cash frozen in their accounts.

Unable to say when the search for some $600 million of missing customer funds might conclude, the trustee overseeing the liquidation process moved to deflect mounting pressure to give back more of that collateral, saying he could not yet legally release individuals' funds.

As traders, exchanges and lawyers sought to untangle accounts, the U.S. futures regulator confirmed it had begun a formal probe into the collapse of the brokerage once run by Jon Corzine, a Wall Street legend and former New Jersey governor.

The firm's bad bets on European debt triggered a crisis of confidence in one of the most active commodity brokers in the world.

The Commodity Futures Trading Commission investigation follows the discovery that some $600 million was missing from segregated accounts, customer funds that are meant to be held separate from the broker's own money.

The CFTC also said it would do a sweeping audit of all clearing futures commission merchants to ensure customer funds were properly segregated.

The search for MF Global funds has delayed and complicated the process of returning funds on account to the firm's customers, whose cash has been frozen for almost two weeks. While clients with open trading positions were transferred to new brokers, those holding only cash have not seen any funds.

There are growing concerns that regulators may be unable to find the missing customer funds, at least in a state where it can be paid back to creditors.   Continued...