What Happened at MF Global?

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We still don't really know what happened at MF Global, but Reuters is reporting that--much to the surprise of many involved--there is so far not much evidence of criminality.


Lawyers and people familiar with the MF Global investigation of the firm that was run by former Goldman Sachs head Jon Corzine say that even though the hunt is still on to find out whether or not officials at MF Global intended to pilfer customer money in a desperate bid to keep the brokerage from failing, the trail at this point is growing cold.

To date, scant evidence of criminal intent has emerged in company emails, no former or current employees have sought to cut a deal to provide testimony about potential wrongdoing and seasoned defense lawyers say they are not seeing the tell-tale signs of a hot criminal investigation.

A source familiar with the work of Louis Freeh, trustee for the MF Global holding company that filed for Chapter 11 bankruptcy protection, says investigators have yet to find evidence of fraud in the multi-faceted and complex investigation.

The source, who declined to be identified because Freeh's office is still conducting its inquiry, says there was plenty of "chaos" at MF Global in its waning days, but "no evidence of fraud." Freeh is a former Director of the Federal Bureau of Investigation.

I don't understand how this could be true.  To be clear, I am not saying that it couldn't be true--only that I don't understand how such a thing could have happened.  There is more than a billion dollars missing from supposedly segregated client accounts.  I understand that it was chaotic, but what kind of chaos causes you to accidentally move money out of money that any moderately sophisticated compliance system should have automatically flagged for approval?

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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