MF Global admitted to using its customers’ money in its troubled last days before announcing bankruptcy, a federal official has told the AP.A MF Global executive made the admission to the federal official on a call this morning, the AP reports.
This morning, CME Group confirmed that MF Global had not properly separated its company funds from customer’s money while doing business, and did not adhere to other rules set by the Commodities Futures Trading Commission. It is currently conducting its own investigation of the company.
Last night, DealBook reported that federal regulators were investigating the futures brokerage for hundreds of millions of dollars worth of money missing from its clients accounts (the latest figure is around $600 million to $700 million). Although it was initially surmised that the discrepancy could have been due to poor record-keeping and accounting methods, with the latest admission it seems like that’s not the case anymore.
One of the main principles (and laws) of financial firms are that it is suppose to keep the company’s money separate from its customer’s money. The use of money in clients’ accounts is fraud, and will have even more serious implications for MF Global besides its looming bankruptcy proceedings.
If what the federal official is telling the AP is true, someone is going to jail.
UPDATE: MF Global’s attorneys have said at the preliminary bankruptcy hearing today that all funds in the company’s broker-dealer operations are accounted for. That’s just one portion of the firm, though.