The US Commodity Futures Trading Commission (CFTC) reported on Thursday the Federal Court in New York has ordered Jon S. Corzine, former CEO of MF Global Inc., to pay a $5 million monetary penalty for taking a major role in the brokerage’s unlawful use of customer funds and for his failure to diligently supervise the handling of customer funds. In addition, the court has imposed a $500,00 penalty to Edith O’Brien, former assistant treasurer of MF Global, for aiding and abetting the brokerage’s violations.
Neither Corzine, nor O’Brien are allowed to register with the CFTC in any capacity of an FCM for a perod of 18 months. The orders were entered on 5 January, 2017.
During the last week of October 2011, MF Global unlawfully used client funds totaling nearly $1.0 billion, according to the order. The brokerage used the amount to cover its own expenses and fund the operations of its affiliates, as well as to pay broker-dealer securities customers and pay FCM customers for withdrawals of secured customer funds. The broker has failed to treat respectively its FCM customers’ segregated funds and instead used the funds to fund its own business. The broker is not allowed to withdraw client segregated funds in the first place.
At the time the transfers took place, MF Global was experiencing a worsening liquidity crisis.
The court has found Corzine, who was ahead of MF Global and its parent company, liable for the companies’ violations. The principal also failed to supervise diligently the activities of the officers, employees, and agents of MF Global in their handling of customer funds. Morover, he was aware and had given its approval for the transfer of funds from client accounts to proprietary corporate accounts and their use for the purposes of the brokerage.
In 2014, the CFTC obtained orders against MF Global and its parent company MF Global Holdings Ltd., which required restitution in amounts sufficient to pay all customer claims. MF Global and MF Global Holding were each required to pay $1.2 billion in restitution to its customers, as well as a $100 million civil monetary penalty. The two performed misuse of customer funds and related supervisory failures in violation of the CEA and CFTC Regulations.
According to their websites, MF Global and MF Global Holdings are filing for bankruptcy and their clients’ access to markets is restricted to liquidation only.