It’s been a revealing day in the case of the missing MF Global client funds.Sources have told DealBook that MF Global borrowed money from their clients’ accounts without posting enough collateral in the firm’s last days before filing for bankruptcy. The act itself is legal if the brokerage had backed up the borrowing, but MF Global obviously didn’t — essentially taking a “free loan.”
This is a big step of progress in the search for the $600 million of missing money, but it might yield the worst result: that the customers’ money will never be found. DealBook reports that no one knows what was done with the borrowed money.
Earlier today, MF Global’s court-appointed trustee was given clearance to start returning up to $520 million that had been frozen in clients’ accounts, a mark of progress in terms of providing relief to anxious customers who had been fighting to get their money back. Whether clients will ever be made whole, however, is yet to be determined.
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