MF Global Bankruptcy: $1.6 Billion in Customer Funds Missing Under Jon Corzine

MF Global Holdings filed for Chapter 11 bankruptcy protection, becoming the eighth largest bankruptcy in U.S. history at that time. The firm, led by former U.S. Senator and New Jersey Governor Jon Corzine, reported that up to $1.6 billion in customer segregated funds were missing. The collapse came after MF Global invested more than $6.3 billion in sovereign bonds issued by struggling European countries, and on October 25 reported a $191.6 million quarterly loss, prompting Moody’s and Fitch to cut the company’s credit ratings to junk status.

Federal investigators discovered that during the final week of October 2011, in violation of U.S. commodity laws, MF Global unlawfully used nearly one billion dollars of customer segregated funds to support its own proprietary operations and the operations of its affiliates. Bloomberg News reported that such transfers occurred, on at least one occasion, “Per JC’s [Jon Corzine’s] direct instruction,” according to an internal memo. Corzine, hired as CEO in March 2010, stepped down on November 4, 2011, amid the billowing scandal.

The case exemplified financial elite impunity: despite clear evidence of illegal use of customer funds and Corzine’s direct involvement, no criminal charges were ever filed against him. In 2017, Corzine was ordered to pay only a $5 million civil penalty by the Commodity Futures Trading Commission for his role in the unlawful use of nearly $1 billion in customer funds and failure to diligently supervise. Customers eventually received full restitution after years of litigation. The stark contrast to the aggressive prosecution of 1,000+ bankers during the Savings & Loan crisis highlighted the two-tier justice system where politically connected Wall Street executives faced no criminal consequences for financial crimes.