Since JP Morgan officials denied that money found in their bank belongs to MF Global clients, the hunt for around $600 million of missing funds is still on (via WSJ).Regulators are saying the search will be an uphill battle. And the reason for that is very simple:
“Their books are a disaster,” Scott O’Malia, a commissioner at the Commodity Futures Trading Commission, one of the regulators leading a hunt that has stretched 10 days so far, said in an interview. “We’re trying to figure out what numbers are the real numbers.”
We’re talking incomplete transactions, numbers that just don’t add up, and other inconsistencies. It’s so bad, that after seeing the books, Thomas Peterffy, chief executive of Interactive Brokers Group Inc., told the WSJ that he walked away from a hand-shake deal to save the company.
Investigators say producing routine information about what’s in the books took hours.
Of course, MF Global says that it’s doing its best to comply with the investigation, but since they’ve filed for bankruptcy, legally, they can’t access some of their bank accounts.
So in the end, the money could be anywhere from inside the banks and clearing houses that made margin calls on the company to MF Global’s UK subsidiary. Either way, the books aren’t telling.
On the other side of the world, regulators are trying to sell MF Global’s Asia business. Because of problems unwinding trading positions, this is proving difficult, and according to Reuters, the unit may have to be chopped up and sold in parts to buyers still sceptical about what’s going on in the States.
“The complexities and challenges arising from the Chapter 11 filing in New York, as clients and exchanges have sought to unwind and minimize client exposures, have meant that the bidders were not able to reach the point where terms could be agreed in the time available,” said Patrick Cowley, a principal at KPMG in Hong Kong.