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MF Global

The case against John Corzine according to James Koutoulas on the one year anniversary of the demise of MF Global

Submitted by Roanman on Wed, 10/31/2012 - 16:55

 

From Zero Hedge, yet again.

John Koutoulas offers up a primer to prosecuters everywhere for the prosecution of John Corzine on charges of fraud and possibly perjury in the matter of MF global and One Billion Six Hundred Million Dollars of supposedly segregated customer funds.

We've cut and pasted the conclusion which probably get's you home.  This isn't the easiest read we've ever posted but we found it to be worth the effort.

There are links all through this thing which disappeared when I first formatted this post.

If you drag your mouse around a bit you'll find some other good stuff.

 

To sum up, while Vice President Joe Biden’s “Smartest Guy I Know” was smart enough to not explicitly say “Steal the Customer Money” in an email, there is enough circumstantial evidence, to conclusively prove fraud (and probably perjury) beyond a reasonable doubt.

  • Corzine was well aware of the risk involved with his European Sovereign Debt trades, and fired the risk manager who brought the risk to the board’s attention.
  • Corzine encouraged his yes man CFO Henri Steenkamp to risk deficits in customer segregated funds against the advice of his more experienced CFO, Christine Serwinski.
  • MF Global falsified a segregated funds report to show $200M in firm excess while internal calculations, external JP Morgan calculations, and common sense showed massive shortfalls.
  • That 200M coincidentally is the exact amount (less 170k and change) transferred from customer accounts to MF Global’s house account, with exactly 87.5% of it being transferred to JPM almost immediately following the initial transfer.
  • None of the transfers of customer money to JPM or BONY were approved by CME Group which, as MF Global’s DSRO, required MF Global to have all equity withdrawals pre-approved by them in writing.
  • JP Morgan risk officers notified Corzine personally of their concern that customer money may have been used as part of the initial transfer.
  • MF Global intentionally changed its business practices to favor its own liquidity needs over its customers by redirecting wire redemption requests to checks. This incidentally, would have zero effect on its liquidity position if it was not knowingly misusing customer funds, as unlike banks which may fractionally reserve lend, brokers must have a ratio of customer funds or permitted collateral greater than 1:1, as per CFTC Commissioner Jill Sommers, “EVERY SECOND OF EVERY DAY.”

While no single bullet point proves fraud, taken together, any reasonable person will conclude that Corzine is guilty beyond a reasonable doubt.

Last December, when Rick Santelli asked me if customers would get their money back, I told him, “Damn right they will.” The distressed debt markets agree, as buyers have now paid more than 98% of the face value of customer claims for US designated accounts, and over 93% for claims for 30.7, UK designated accounts. However, the futures industry remains severely damaged as shown by CME’s Q3 profit down 31% as futures customers would rather take counterparty risk with a TBTF bank than trust uninsured clearing houses with ‘segregation’ protection that has proven to be nothing more than a paper tiger by Corzine’s theft. 

If Corzine is allowed to walk, it sends the message to not just the futures industry, but the entire US financial complex, “You can steal customer money from not just commodities accounts, but savings accounts, checking accounts, 401ks, and IRAs so long as you pay Obama 500k in bundled protection money, err, campaign contributions.”  And, while the current administration clearly doesn’t care about the integrity of markets, I do.

So today, for the 1 year anniversary of the day 38,000 farmers, ranchers, commercial hedgers, retirees, traders, and hedge funds were robbed, and 2,800 MF Global employees lost their jobs so an incredibly insecure multi-,multi-millionaire, Jon Corzine, could desperately try and show the world he is a great trader, after all, I renew my pledge to do all that I can to help put him behind bars. I am working with multiple state Attorneys General to help them bring charges once the DoJ officially closes their ‘investigation.’ And, I have another little trick up my sleeve that I assure you that Corzine’s high-priced lawyers haven’t thought of, so stay tuned.

So, Jonny Boy, keep pretending how you did nothing wrong and you’re just bummed out that you haven’t gotten back to work being an awesome hedge fund manager. I hope your 500k bought a Presidential Pardon along with the DoJ’s silence, because the law is coming for you and you’re going to need it.

xoxo,

James L. Koutoulas, Esq.
President, Commodity Customer Coalition
CEO, Typhon Capital Management

 

 

Two time losers

Submitted by Roanman on Fri, 07/13/2012 - 08:34

 

From Huffington Post

We'll say it again, why bother arguing about new financial regulations, when existing regulations go unenforced?

Our financial system is corrupt our government regulators are at best incompetent and at worst complicit.

Once again regulators across two different presidential administrations of two different political parties had been on notice with regards to problems at a supposedly regulated company, and did nothing to protect the public.

 

PFG Collapse Hits Some MF Global Victims

 

 

When commodities brokerage firm MF Global collapsed last October, losing $1.6 billion in customer funds in the process, Christopher Dickerson was sure he'd dodged a bullet. Just one month before the collapse, Dickerson had taken the bulk of his money out of his MF Global account.

He'd moved his cash, about $250,000 in all, to a smaller commodities brokerage firm based out of Cedar Falls, Iowa, called PFGBest, because it was offering the same services he sought -- Dickerson trades futures contracts in his spare time -- for much lower fees. "I thought that would never happen again," Dickerson said. "Stupid me."

On Tuesday, Peregrine Financial Group, which operates PFGBest, filed for bankruptcy, the same day that the Commodity Futures Trading Commission filed suit against the firm for fraud. The day before, police in Cedar Falls discovered the firm's founder, Russell Wasendorf, unconscious in his car near the firm's offices after an apparent suicide attempt. According to reports, he has now emerged from a coma.

In the complaint, the CFTC accuses Wasendorf and his firm of illegally tapping into customer funds since at least February 2010, and falsely reporting to regulators that it had over $220 million on its books when in reality the firm had just $5.1 million. The complaint also alleges that Wasendorf falsified some bank records he'd sent to regulators.

 

 

To quote Peter Brandt

Submitted by Roanman on Wed, 07/11/2012 - 08:45

 

We typically try pretty hard to create posts for everyone, knowing of course that we seldom succeed at that goal.

This post is specifically for the about 12 people we know for sure are active in the commodity markets, although the moral should be washing over just about everybody about now.

The financial system across the entirety of "The West" is rotten to it's core, the call for more regulation and the condemnation of laissez fair capitalism miss the greater point, that being that the regulations in place are neither followed nor enforced, and that the regulators cashing the peoples paychecks are at best incompetent and at worst complicit in the now chronic frauds perpetrated by the banks.

To quote Peter Brandt on the issue,

 

 

CFTC stands for Commodities Futures Trading Commision.

Sorry about the ad, everybody is getting slicker about keeping their promotions in the vid.

 

Four Bullet Points Explaining How JP Morgan Doubled Its Money From MF Global's Corpse In Seven Months

Submitted by Roanman on Fri, 06/15/2012 - 21:24

 

From Tyler Durden at Zero Hedge

 

Don't read this if you have high blood pressure or if you are a client of MF Global's, whose money is still held by JP Morgan.

 

1.  JPMorgan is put on MF Global bankruptcy committee on November 7, 2011

2.  Two weeks later, JPMorgan buys MF Global's 4.7% in LME for 39 million in a "competitive bidding" process.

3.  7 months later, on June 15 2012 the LME gets an offer for $2.2 billion from China's HKEX, making JPM's stake worth $103 million.

4.  JPMorgan makes over 100% cash on cash return in 7 months while MFGlobal money is still stuck at JPM.

 

In the meantime, Jon Corzine was, is and will always be a free man.

 

MF Global Hearing

Submitted by Roanman on Thu, 03/29/2012 - 10:14

 

Click on the photo below to link up to the C-Span coverage of the MF Global hearings.

If you have any money invested anywhere or hope to have some money invested somewhere, some day in the future, you should probably take the time and watch this/these hearings.

This one will only take about three hours out of your life.

I'll admit to having scrolled forward during most everybody's prepared remarks.

The questioning process is very revealing, to say the least.

 

 

Reading on a cold Sunday evening.

Submitted by Roanman on Sun, 03/04/2012 - 17:41

 

CNN of all people provides a well done story on Dean Tofteland, ripped off farmer in the MF Global fraud and his pursuit of John Corzine and Dean's stolen $253,000.

 

 

Seems kind of simple when you put it that way.

 

Chris Whalen and Uncle Roany each have a question. Actually Uncle Roany has four ... maybe five, I quit counting.

Submitted by Roanman on Tue, 02/14/2012 - 14:28

 

Although it is gonna take me a minute to get there.

Here's why the MF Global story matters to you.

Let's just suppose that you own one share of Apple and the caca having hit the fan, your brokerage firm goes upside down ... or boobs up, as my beloved partner used to say.

Here's the nasty suprise heading in your direction.

You don't really own that share of Apple as it has been purchased with your funds but is being held in your brokerage firm's name supposedly for your benefit.

What is even more interesting is that you have most likely given your brokerage firm permission to pledge that share of Apple as collateral for it's own purposes, be it trading or borrowing or whatever they might want it for when you signed that paperwork you didn't read.

Here's why the MF Global story double matters to you.

The customers of MF Global weren't trading stocks which were purchased in MF Global's name, they were holding segregated commodity accounts, US government treasuries and in some cases physical product most typically gold bars, all of which were held in their own name with MF Global being paid to provide secure housing.

This means that without specific authorization which it mostly never recieved, by law MF Global should not been able to pledge those assets for it's own purposes.

The law was ignored by MF Global but much more importantly, our government regulators who are supposedly in the employ of the victims of this crime actually abetted this theft in the following fashion:

Faced with the choice of the typical Chapter 7 liquidation for a commodities brokerage concern wherein customer assets are untouchable, the SEC deliberately approved the Chapter 11 reorganization of MF Global, the one of two bankcruptcy options that threw customers assets into the entire pot of stuff to be carved up among all of MF Global's creditors.

What's even more interesting is that the SEC did this secretly without contacting the Commodities Futures Trading Corporation which probably is the governmental entity that should have made this decision as it has handled most if not all previous commodity brokerage failures and had experienced people and proven systems in place that would have more likely protected customer accounts.

So to make a long story short federal regulators have abetted the theft of money from private citizens in favor of in this case ... as usual ... JP Morgan and Goldman Sachs, with the now addition of George Soros as the likely discount purchaser.

Nice eh?

Not to beat a dead horse, but remembering the words of President Barack Obama.

 

 

     

 

Ok, so here's my first ... Ok, Ok second question,

 

Just axin.

 

Now for Chris Whalen's question from The Institutional Risk Analyst.

"So why is it that the Large Media have such trouble reporting this story? The fact seems to be that the political powers that be in Washington are protecting JPM CEO Jaime Dimon from a possible career ending kind of stumble with respect to MF Global. By stuffing the commodity customers of the broker dealer via an equity bankruptcy resolution supervised dutifully by SIPIC, JPM and Soros apparently get to benefit at the expense of the commodity customers of MF Global. This situation stinks to high heaven and everyone on the Street we've spoken to about the matter knows it. As the article below notes:

"Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts "disappeared".

The effort by former New Jersey governor and MF Global CEO Jon Corzine to save his firm by stealing customer funds seems to warrant further discussion, yet instead we have silence. Here's a question: When is Corzine going to be indicted for securities fraud and other high crimes and misdemenors? The answer seemingly is that the Obama Justice Department is afraid to go there. Thus the fraud at MF Global continues and Washington does nothing to inconvenience the banksters as customer funds are expropriated.

But please, to our friends in the Big Media, could we stop saying that we don't know the location of the missing $1.6 billion of client funds from MF Global? The money is safe and sound at JPM and other counterparties. As with Goldman Sachs et al and American International Group, the banks have been bailed out at the cost of somebody else. And the various agencies of the federal government are complicit in the fraud."

 

Mr. Whalen's conclusion feels about right to us with regards to Fox and the Wall Street Journal who the other day "reported" that funds had "VAPORIZED".

But can you imagine The New York Times, MSNBC, CNN, CBS etc. ignoring this story in an election year with a Republican in the White House?

 Ya can't ... can ya?

 

The following article referenced above is from Clearing and Settlement.com.

 

How JP Morgan And George Soros Ended Up With MF Global Customer Money

In recent testimony before a Congressional committee, MF Global’s former chief Jon Corzine as well as other MF Global executives said repeatedly the didn’t know where the failed brokerage firm’s $1.2 billion of missing client money was. In fact, MF Global executives knew exactly what happened to the money, as do the regulators who oversaw the firm’s bankruptcy. The so-called segregated customer funds were repeatedly, and legally (through re-hypothication), used as collateral for MF Global loans for 100:1 leveraged bets on European sovereign debt.

A substantial portion of MF Global’s commodity clients cleared their transactions through the Chicago Mercantile Exchange and Comex, owned by CME Group (ticker: CME). The question now looming over CME’s stock is whether the company will be liable for customer losses, as the Commodity Customer Coalition, a group that says it represents some 8,000 investors—including many hedge funds–with exposure to MF Global are not going down without a fight.

Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts “disappeared”. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line, meaning MF Global’s creditors, namely J.P. Morgan and other trading counterparties, got their money first, just as AIG’s CDS (credit default swap) counterparties (mainly Goldman Sachs) got their money first when the U.S. government bailed out AIG.

To add further insult to injury for MF Global clients, the firm reportedly unloaded hundreds of millions of dollars’ worth of securities to Goldman Sachs, and others, who then reportedly flipped these securities within a day to George Soros funds.

 

Ok so whose political party benefits when George Soros is flush with cash?

It all sort of comes together after a while don't it?

 

If it ain't Goldman Sachs, it's J.P. Morgan

Submitted by Roanman on Thu, 01/19/2012 - 19:39

 

From Reuters.

It's always interesting when the thieves start turning on each other.

Click on the photo for the entire story.

 

In MF Global, JPMorgan again at center of a financial failure

 

Thu Jan 19, 2012 10:18am EST

 

(Reuters) - In late October, as MF Global Holdings Ltd teetered toward bankruptcy, Jon Corzine phoned his close-knit circle of Wall Street friends for help.

His firm, facing demands from customers and other firms for cash, needed to sell billions of dollars in securities to raise the money. As the week progressed, MF Global executives came to believe that JPMorgan Chase & Co., one of MF Global's primary bankers and a middleman moving that cash, was dragging its feet in forwarding the funds.

 

Scroll down one post to see who the boys are supporting in this years presidential election, having supported Obama in 2008.

 

Since we're on the subject of slime, it's back to JP Morgan and MF Global.

Submitted by Roanman on Mon, 11/14/2011 - 11:39

 

The following is the punch line to a white paper by John Roe, and James L. Koutoulas, Esq. concerning the disposition of stolen assets trapped in the MF Global fiasco.

Click anywhere on the excerpt below for a very short and well written paper which also serves as a primer on the how, the what, the who and the why of commodities trading.

Way super double highly recommended. 

 

By subordinating customers with collateral in segregated funds to creditors of MF Global's estate, the Trustee is essentially making the creditors the beneficiary of a criminal act.  If MF Global comingled segregated funds with corporate assets, it was a criminal act.  Paying such a creditor's claim with a portion of those comingled funds would make them a beneficiary of that crime.  Paying JP Morgan with an Iowa farmer's money is not only morally and legally wrong, it risks the future of the American economic model.

 

Commodities accounts were reputed to be regulated by an entity of the federal government known as the Commodity Futures Trading Commission.

It's true mission however is to assist large Wall Street Banks in their theft of middle class America's wealth.

Click this little gear here for our recent piece concerning former Goldman Sachs great, Democratic Senator from New Jersey (is that better Robert?), Democratic Governor of New Jersey, well known Democratic and Obama fundraiser, and MF Global CEO John Corzine who famously lobbied the CFTC in order to prevent the instituition of rules associated with the Dodd-Frank legislation that would have prevented MF Global from commingling client's money with it's own and thus would have prevented this 630 million dollar theft.

 

Rule (1.29)

Submitted by Roanman on Thu, 11/10/2011 - 15:57

 

When somebody starts telling you the game is rigged in favor of the "Big Banks", this is exactly what they're talking about.

Click anywhere below for the entire Robert Lezner, Forbes article where you will learn that Former Goldman Sachs star trader, United States Senator, Governor of New Jersey, well know Obama bundler and MF Global CEO John Corzine met no fewer that 10 times with the Commodity Futures Trading Commission in order to see to it that this vile rule of the supposed government regulator, did not change as a result of Dodd-Frank.

 

MF Global May Have Used Customer Funds In The Losing $6.3 Billion Trade Without Informing Clients

 

After an intense day of investigation, I have just discovered  that a CFTC (Commodity Futures Trading Commission) rule(1.29) allowed  Jon Corzine’s MF Global to use the margin and cash in customers heretofore segregated accounts to amass a risky $6.3 billion investment in European sovereign debt that backfired. Nor did Corzine have the obligation to  inform any of these customers he was  gambling with their money. Or that he was intending to keep all the profits for himself and  his troubled firm. Nothing for the customers.

The language of Rule1.29 allows  “The investment of customer funds in instruments described in 1.29 shall not prevent the futures commission merchant (MF Global) or clearing organization so investing such funds and retaining as its own any increment or interest resulting therefrom.” Increment refers to any trading profits or gains.

The criminal division of the Justice Department in New York — as well as the SEC and the CFTC and members of Congress– are  investigating whether any laws were violated and if so, whether any criminal charges can be brought. As of 3pm today, there has been no sign of the missing $633 million. My sources believe it was probably grabbed by the institutions that made the margin calls on MF Global as the European bonds sank in value.

This shocking loophole, which is available to all  commodity traders, whether giant ones like Goldman Sachs or members of commodity exchanges,  means that huge risks are being taken with money that does not belong to the trading firms– without the customers having any idea of the danger they are in.  As Andy Abraham, a futures trader in Israel put it to me today;  “this means they can take segregated funds and leverage them to kingdom come. It means nothing is safe.”

This rule, which has been in effect since 1974, is shocking and highly irregular since it allows any futures dealer to use customers money for its own selfish purposes– and never inform its customers it is doing so. What’s even more unfair is that the dealer(MF Global) gets to keep all  the income and the trading profits, if any from a transaction that uses other people’s money– not its own house capital.  That is unless some prior arrangement about sharing profits was made privately beforehand with the client. None of the MF Global clients I’ve spoken to today had the foggiest notion about this arrangement– which at minimum is   outrageously unfair to the rule that the customer  comes first. All losses must be made  up by the dealer, which in this case may be totally impossible.

 

Just a small example of the rot that is our government.

 

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