Legal Action Raining Down On MF Global As Investigations On Firm Continue

Jon Corzine Sad

Photo: AP

This federal crackdown on MF Global is getting harsh. There are now subpoenas flying around and allegations of insider trading in the mix. Oh, and MF Global CEO Jon Corzine is getting sued.Here’s a round-up of all the legal happenings:

  • A class-action lawsuit has been filed against Jon Corzine and other MF Global executives and board members from investors, Bloomberg reported. Not sure if this is actually a good move, because an earlier Bloomberg article said MF Global customers may have to wait “years” to get their money back if legal action is sought against the firm.
  • As the hunt continues for the missing funds from customers accounts – now estimated to be about $633 million – the Commodity Futures Trading Commission has sent subpoenas to Pricewaterhouse Coopers, MF Global’s accountant, for its all its data on trades for clients on the commodity market, Bloomberg reported.¬†This move could help bring more light into what happened to the customers’ money – which sources have told CNBC is all there, just kind of mixed up because of a speedy liquidation. It is unlikely PwC will face any legal action from this due to a precedent called in pari delicto that states one wrongdoer cannot shift the blame onto another, according to Reuters.
  • The SEC, meanwhile, is investigating trades that happened before the MF Global downgrade by Moody’s last Monday — the catalyst for the company stock’s tumble and eventual demise — which may have been made due to the passing of confidential information, or – insider trading, according to Bloomberg.

From Bloomberg: 

MF Global’s $287.5 million of 1.875 per cent convertible notes due in 2016 fell as much as 1.1 cent to 68.7 cents on the dollar on Oct. 24, one hour before Moody’s Investors Service announced that it cut the company’s credit ratings to the lowest investment-grade rating and was considering cutting it to junk, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority.

  • MF Global’s bankruptcy court-appointed trustee — James Giddens — has requested permission to subpoena MF Global directors and employees as part of his efforts and duty to shut down the business.

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