MF Global Looted Customer Accounts

MF Global Looted Customer Accounts

November 25th, 2011 

 

By Stephen Lendman

Wall Street's business model is grand theft. Jon Corzine was MF Global's CEO. Earlier he headed Goldman Sachs, America's premiere racketeering organization.

He also was one of legions of corrupt politicians as US senator and New Jersey governor. His extreme, longstanding criminality warrants putting him in prison for life. No restitution can reverse his harm. It's true also for many others like him.

Before its collapse, MF Global (MFG) faced a run on its holdings. On October 31, it filed for Chapter 11 bankruptcy protection.

On November 19, Reuters said the firm "moved hundreds of millions of dollars in customer money from its US brokerage unit to Bank of New York Mellon Corp. in August, just months before filing for bankruptcy...."

In other words, MFG lawlessly looted customer accounts. It used client money for its own purposes to speculate, as well as cover debt obligations and losses. At issue is grand theft.

In fact, it's one of the most brazen acts in memory in a business notorious for outrageous criminality. What ever's gotten away with incentivizes Wall Street crooks to steal more. Why not! At most, they're slap on the wrist punishments mock rule of law justice.

On November 19 on the Kaiser Report, Barry Ritholtz commented on the big lie, hyper-leveraged banks, the MFG scandal, and congressional political whores, saying:

People responsible for creating these problems shift blame to others. Facts say otherwise. Wall Street speculators take big risks. They use hyper-leverage that's only effective when it works.

"Their models were wildly optimistic. Banking is supposed to be very boring." Decisions are supposed to be made about who's credit worthy and who isn't. Instead, reckless speculation replaced investing and sound lending policies.

Wall Street's ideology is bankrupt, "and it's causing global damage to the economy. For investment banks, the five biggest houses got waivers on leverage rules."

SEC collaborators rigged the system for them. These banks also "happen to be the five biggest donors to Congress," or among the largest. Over time, successful lobbying removed everything affecting profits, no matter the risk. The SEC, Fed, FDIC and CME rigged the system for them.

Brazen fraud became standard practice. Criminals deserving prison keep stealing. The dirty game involves grabbing "whatever the hell you want and run for the hills. No one will prosecute you."

"MF Global is another order of magnitude. If anyone is going to jail over this whole period, it has to be" their top officials. Don't bet on it, especially a power broker like Corzine.

He's directly responsible for stealing $1.2 billion in client funds. He looted them brazenly. According to Bloomberg:

"Examiners from CME Group Inc., the world's largest futures exchange, found unexplained wire transfers" and $1.2 billion missing "during the weekend the failing broker was talking with possible buyers, a person briefed on the matter said."

Multiple investigations began, including by Justice Department lawyers. The Commodity Futures Trading Commission (CFTC) and Chicago Mercantile Exchange (CME) were responsible for overseeing MFG. They knew what went on but did nothing.

Huffington Post writer Daniel Dicker said the Koch Brothers were tipped off in time to get out safely. Others weren't as lucky.

MFG is America's eighth largest bankruptcy, the first major one the Eurozone crisis caused. Expect more ahead.

Practices cratering economies in 2008 continue. Nations teeter on bankruptcy. Corzine bet heavily that Spanish and Italian debt wouldn't collapse.

Using 40 to 1 leverage, he bet massively the wrong way. His second quarter $190 million loss drove investors away. Those remaining lost everything. Corzine and top executives pocketed millions.

In 1999, he was worth an estimated $400 million when he left Goldman Sachs. Perhaps its double that now, including funds looted from MFG. We may know more later on.

From 1994 - 1994, Corzine headed Goldman Sachs during the time banking became deregulated. Carter began it late in his tenure. Reagan did much more. Clinton completed unfinished business. James Petras calls the 1990s "the golden age of pillage," the decade of anything goes.

It persists in the new millennium because political Washington and regulators look the other way, profiting handsomely by doing it. Everyone feathers nests belonging to others. Self-sustaining corruption continues. Only little people and unknowing investors get scammed. Power brokers make out like bandits.

After losing his 2009 gubernatorial reelection bid, government regulators welcomed Corzine back on Wall Street. New York Fed president William Dudley (a fellow Goldman alumnus) made MFG a "primary dealer." Despite its size and a former trading scandal $10 million fine, it became one of a handful of firms marketing US Treasuries.

At the behest of Corzine and other power brokers, CFTC head Gary Gensler suspended implementation of new rules imposing limits on broker-dealer use of client funds, especially for foreign sovereign debt. In other words, they were freed to commit grand theft. MFG took full advantage.

Wall Street Journal Money & Investing editor Francesco Guerrera wrote about "Three Lessons From the Collapse." He quoted University of San Diego Professor Frank Partnoy, saying:

MFG's "failure illustrates how much financial markets are about trust and confidence. Once you lose those, you are done."

Guerrera's three lessons include:

* closing accounting loopholes and strengthening oversight;
* establishing lead regulators for nonbank financial firms; and
* writing new rules for "nonsystemic" firms as well as "too big to fail" ones.

Dodd-Frank financial reform left a broken system in place. The entire law needs rewriting. Better still, scrap it and start over. Stiff regulations with teeth are needed, including mandatory prosecution of crooks, especially those highest up to let others know invulnerability days are over.

When culpable CEO heads roll, it'll be a good start. However, game-changer differences won't happen until all high level Wall Street swindlers wear numbered striped suits.

Trends forecaster Gerald Celente lost $100,000 in an MF Global gold futures account. He told Russia

Today:

"I really got burned. I got a call," saying "I needed to have a margin call. (W)hat are you talking about," he asked? "I've got a ton of money in my account. They responded, oh no you don't. That money's with a trustee now."

His advice for everyone holding gold ETFs is cash out because "they are going to steal all our money." Angry about MF Global's theft, he called Corzine a "cheap SOB." He's that and much more.

"How come he's not in Jail," railed Celente. It's "because he's one of the white shoe boys from the Goldman Sachs crowd." He added that "the merger of state and corporate power" brought "fascism" to America.

The entire system's too corrupted to fix. Only tearing it down and starting over can work. It's high time the process started. Hopefully, OWS protests began it.

Rumor has it that JPMorgan Chase and perhaps other Wall Street banks are involved. Judge Martin Glenn is handling MFG's bankruptcy. HL Camp, Proprietor of HL Camp Futures, wrote him as follows:

"Our firm is a registered introducing broker with the CFTC. I have written to you previously on behalf of our customers."

"Here is a comment this morning from one of our former customers in Europe," saying:

"I will never do business in the United States of America again."

According to Camp, "(t)he system is to protect futures accounts is broken. And the whole world knows it."

"What started as a failure of one FCM (Futures Commission Merchant) that quickly gave a black eye to the CFTC and especially the CME has now made our United States of America a very bad joke to commodity futures traders all over the world."

"The problem this morning is not just excess margin equity."

"The problem this morning is the reputation of the United States of America."

"Thank you very much for your time and for listening."

Forbes staff writer Robert Lenzner said traders and clients didn't know about MFG's unscrupulousness.

He said a CFTC loophole lets firms speculate with segregated client accounts. Few know it without carefully reading contract fine print or getting sound legal advice.

Lenzner's lesson one is CFTC Rule 1.29 must be scraped. It lets futures commission merchants gamble with client funds.

Lesson two is knowing personal funds aren't safe in futures metals, energy, precious metals, or agricultural futures accounts.

Lesson three is resolving which regulator oversees firms like MFG - the CFTC or CME. One should have primary responsibility and be held accountable for fraud.

Lenzner added that Justice Department attorneys are determining whether federal crimes occurred. He expects a lengthy process because MFG's books "are in a state of chaos," deliberately no doubt.

Whether anyone ends up indicted isn't sure. At most perhaps, expect lower level patsies hung out to dry to let crime bosses like Corzine stay free to steal more. It's how it always works.

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Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.

http://www.progressiveradionetwork.com/the-progressive-news-hour/

Sen. Bernie Sanders Leaks Oil Trading Data: Americans Have A Right To Know Who Drove Up Gas Prices

U.S. oil speculative data released by Senator, sparking ireU
reuters
On Friday August 19, 2011, 12:02 pm EDT

By Sarah N. Lynch

WASHINGTON (Reuters) - Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.

Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.

In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.

The e-mail, which also attaches two files with the data, was sent to Public Citizen's Tyson Slocum asking him to review it and speak with the newspaper about his observations.

In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.

"The CFTC has kept this information hidden from the American public for nearly three years," he said. "This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today."

The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.

The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.

"This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors," John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.

Republicans have already raised concerns in recent hearings about the Treasury's new Office of Financial Research created by Dodd-Frank, and whether its collection of data from hedge funds and banks may constitute a regulatory overreach.

Although the CFTC is barred from releasing confidential data, the law does require the CFTC to hand over such information if a Congressional committee acting within its proper authority requests it. Once it is in the hands of Congress, there is nothing to prevent lawmakers from releasing it publicly.

The leaked data contains long and short positions held by oil traders in 2008, the same year that oil prices spiked to $147 a barrel. Critics at the time accused oil speculators of driving up prices, leading lawmakers to later insert a provision into the Dodd-Frank Wall Street overhaul law compelling the CFTC to place stricter limits on how many commodity contracts any one trader can control.

Among the kinds of traders accused of excessive speculation included passive long investors such as pension funds, which often seek exposure to commodities markets indirectly by going through an intermediary swap dealer such as such as Goldman Sachs and Morgan Stanley.

The data that was leaked to the Wall Street Journal was compiled by the CFTC in 2008 during a "special call" in which the agency sought crude oil position data from swap dealers so they could piece together market activity occurring both on and off the exchange, people familiar with the matter said.

The CFTC first became aware of the breach of the data after a staffer from Sanders' office sent the agency an e-mail with the information and asked the CFTC's chief economist to discuss it more.

The agency began exploring internally whether or not any staffers were responsible for the leak, and concluded that no CFTC employees were involved, according to people familiar with the matter.

It is unclear exactly how Sanders acquired the private information, and a spokesman declined to say.

But people familiar with the matter say the data later obtained by Sanders was first formally requested by the U.S. House Energy Committee. From there it somehow migrated over to the U.S. Senate.

(Reporting by Sarah N. Lynch; Editing by Russell Blinch and Alden Bentley)

August 20, 2011 06:00 PM

Sen. Bernie Sanders Leaks Oil Trading Data: Americans Have A Right To Know Who Drove Up Gas Prices

85 comments

By Susie Madrak

Wow. This is amazing, and although the article doesn't confirm it, the data must reflect market manipulation or Bernie wouldn't have leaked it:

WASHINGTON (Reuters) - Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.
Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.
In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.
The e-mail, which also attaches two files with the data, was sent to Public Citizen's Tyson Slocum asking him to review it and speak with the newspaper about his observations.
In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.
"The CFTC has kept this information hidden from the American public for nearly three years," he said. "This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today."
The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.
The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.
"This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors," John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.

Or to the Justice Department. But I wouldn't worry about that, Mr. Damgard. All you have to fear is the cold, hard light of day.