James Giddens, the trustee overseeing the liquidation of MF Global, said on Monday his investigators have now traced most of the $105 billion in transactions made at the bankrupt securities firm in its final frantic week.
Three months after MF Global filed one of the largest bankruptcies in US history, officials are still scrambling to find some $1.2 billion in missing client funds.
In a report filed with the US Bankruptcy Court for the Southern District of New York, Giddens said his team has identified the parties that were the “immediate” recipients of transfers from MF Global. The report didn’t say which companies received the money, but previous reports have indicated J.P. Morgan Chase was one of them.
The trustee said the “ultimate recipients” of the transfers included banks, exchanges and clearing houses, MF Global affiliates, counter-parties and customers.
The customer shortfall began on October 26 and grew until the October 31 bankruptcy, the trustee said.
“For three months our investigative team has worked to understand what happened during the final days of MF Global when cash and related securities movements were not always accurately and promptly recorded due to the chaotic situation and the complexity of the transactions,” Giddens said in the report.
MF Global collapsed last year due to concern about its heavy bullish exposure to the risky sovereign debt of eurozone nations like Italy. The securities firm began taking those positions at the direction of then-CEO Jon Corzine, the former governor of New Jersey and CEO of Goldman Sachs.
The report said the number of transactions executed by MF Global during a final frantic week “escalated to unprecedented levels.” MF Global’s computer systems and employees had trouble keeping up with these deals and a number of transactions were “recorded erroneously or not at all,” the report said. In fact, these so-called “fail” transactions were five times the normal volume during this final week.
These transactions included “complex instruments,” such as off-balance sheet repurchase transactions involving sovereign debt securities and derivatives, the trustee said.
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