Federal prosecutors for Manhattan US Attorney Preet Bharara have joined the investigation into the meltdown of Jon Corzine’s MF Global, The Post has learned.
A source familiar with MF’s situation has fielded questions from an attorney for Bharara’s office seeking details about the events leading to the firm’s collapse.
A spokeswoman for the US Attorney’s Office did not respond to a request for comment.
Bharara’s entry into the MF fiasco comes on the heels of a number of regulatory probes into the mishandling of hundreds of millions of dollars in client money before the broker-dealer’s bankruptcy filing on Monday.
With lawsuits and investigations mounting, former New Jersey Gov. Corzine has hired lawyer Andrew Levander, of Dechert LLP, to represent him, WSJ.com reported last night.
The FBI and the Commodity Futures Trading Commission have both launched probes in recent days.
Yesterday, SEC chief Mary Schapiro said that she would be looking to uncover exactly what happened at MF, along with the Financial Industry Regulatory Authority.
Regulators are still sleuthing for as much as $633 million in client money that went missing as the firm spiraled out of control.
“We have struggled with the issues with respect to MF Global, and our teams have worked really hand-in-hand as we’ve sorted through the issues there on a virtually 24-hours-a-day basis for the last week,” Schapiro said.
MF’s currently disastrous state of affairs is far from the picture of the mini-Goldman Corzine hoped to engineer when he began transforming the once-staid broker-dealer into an aggressive firm hopped up on risky European debt.
Just months before the collapse of MF, the brokerage firm mounted a full-court press to compel regulators to allow it to tap customer funds to invest in the kind of dicey sovereign debt that led to its demise.
The lobbying effort was in response to new rules that the CFTC, run by Chairman Gary Gensler, was planning to impose on broker-dealers, restricting them from making investments with client money in sovereign-debt securities.
Broker-dealers are allowed to reinvest customer funds in securities deemed to be safe in order to earn interest.
But the CFTC — under new authority granted by the Dodd-Frank Act — was proposing even stricter rules to protect customer accounts from getting whacked.
Corzine, who ran Goldman Sachs before being ousted in 1999, had numerous phone conversations with Goldman alum Gensler to plead the firm’s case for looser regulations.
According to CFTC records, officials at MF and the CFTC, including Gensler and Corzine, most recently met on July 20 to discuss the regulator’s proposed rule.
Critics of the CFTC’s harsher planned regulations, including rival broker-dealer agencies like Newedge, argued that barring broker-dealers from reinvesting client cash in sovereign debt exposed them to currency risk.
They also argued that the harder-hitting rules would significantly dry up liquidity in the market. The CFTC has still not made a final decision on its rules proposal.
Historically low interest rates over the past few years also have made it tougher for broker-dealers to earn returns in excess of what they provide to customers in exchange for depositing their funds.
“With interest rates as low on US debt, there’s a tendency to try and stretch for yield,” said Larry Tabb, founder of the research firm The Tabb Group.