Thursday, December 22, 2011

Guess Where a Big Chunk of MF Global Customer Money Just Turned Up? At JPM London

Guess Where a Big Chunk of MF Global Customer Money Just Turned Up? At JPM London [link]
by Tom Heneghan, International Intelligence Expert
Wednesday December 21, 2011

JP Morgan's 'Suspicious Involvement' in the Collapse of MF Global
James Koutoulas on JP Morgan's involvement in the MF Global collapse:
"[JP Morgan] wears way too many hats in this situation. Their fingers are all over this. They were a custodian of customer segregated funds, they were a primary lender to MF Global,...they were head of the creditors' committee in bankruptcy court, they're buying customer claims for pennies on the dollar—vulture claims, and it appears that they just may have gotten favorable treatment by purchasing LME stock from MF well as buying these sovereign debt positions that have turned out to be profitable trades."
Read the rest here at BusinessInsider.

Dear Jamie Dimon at Reformed Broker.

Guess Where a Big Chunk of MF Global Customer Money Just Turned Up? At JPM London
The London headquarters of the global investment bank giant JP Morgan

Cate Gillon/Getty Images

Let's see. MF transferred $200 million to their clearing bank JP Morgan in London three days before their bankruptcy according to the WSJ. Dealbook says it was on the LAST business day. And it took the regulators THIS long to find it?

And allegedly at the time JPM London suspected that the money might be coming from the customer accounts. I wonder why 
that would occur to them?

Read this carefully. The spin is there but the truth is beneath the surface of sugar frosting and distracting swirls of fluff, and the decorations carved from baloney that have marked this story from day one. 

This could be a misdirection. I wondered if this was money to cover the bonuses to the London MF staff, but they were paid the day before the bankruptcy. Nothing like making a find and then being able to dismiss it. 

At the end of the day, I think the regulators have known where the money went for some time now. The problem is that the parties who received it won't admit it and give it back, and they have powerful friends. And there is a greater scandal floating beneath the surface. Maybe involving someone big enough to rig a global market or two. 

I enjoyed the 'report' saying that George Soros had received the funds and assets. As if he was engaged in margin calls with MF Global prior to bankruptcy. He might have bought something in the aftermarket peddled to him by the original recipient who held MF Global 
testicular-wise before they went under. That was the most likely reason the firm would take the risk and dip into customer funds in desperation to maintain their 'winning positions.'

It is also credible that MFG was 'set up' by a company with an inside knowledge of their financial condition and cash flows. 

When will they roll out the rest of the story, Christmas Eve or New Year's day? And in what year? 

Wall Street Journal
MF Global Transfer Draws Scrutiny
By Scott Patterson And Aaron Lucchetti
December 21, 2011

Investigators on the hunt for missing customer money from MF Global Holdings Ltd. are scrutinizing about 
$200 million moved to a company account at J.P. Morgan Chase & Co. three days before the securities firm filed for bankruptcy protection, according to people familiar with the matter.

The transfer has drawn interest from investigators partly because 
J.P. Morgan asked MF Global in a letter the following day to attest that the Oct. 28 shift of funds didn't violate regulations designed to protect customer money.

The letter suggests that officials at 
J.P. Morgan, which cleared some trades for MF Global, had become concerned that the securities firm might have gotten the money by dipping into customer funds. Commodity Futures Trading Commission rules prohibit futures brokers from using customer money for their own trading purposes.

J.P. Morgan accepted the roughly $200 million transfer, using it to help cover an overdraft in MF Global's proprietary-trading account at the bank. 
It isn't clear if J.P. Morgan still has the money. 

The transfer was small compared with the estimated $1.2 billion in customer funds still unaccounted for more than seven weeks after MF Global collapsed. The bankruptcy trustee for MF Global's U.S. brokerage unit has said recovering money from the company's trading partners would be easier if counterparties knew they were accepting funds belonging to customers. 
(Or how about everyone who received a transfer from MFG of greater than $100 million in the week before bankrupcy please raise their hand?)

It isn't clear how MF Global responded to J.P. Morgan's Oct. 29 letter. The letter hasn't been publicly released by regulators or investigators. 
(And it isn't clear if they even received this letter, or that it was sent.)

The letter indicates that J.P. Morgan officials knew the money came from segregated customer accounts, because it specifically asked whether the transfer of funds from customer accounts was compliant with regulations.
 Customer accounts can contain both customer and firm funds. On Oct. 30, or the day after the letter was sent, MF Global alerted regulators to a shortfall in customer funds. It filed for bankruptcy protection on Oct. 31.

A person familiar with J.P. Morgan's thinking said the bank wouldn't normally ask for assurances about such a withdrawal, but decided it was "prudent and sensible" when MF Global's problems deepened... 

Records indicate that by the time MF Global transferred the funds, there already was a shortfall in customer accounts
 . As of Oct. 27, MF Global had a $213 million deficit in customer accounts, according to a statement the company provided to the CME after the Chapter 11 bankruptcy-protection filing.

The transfer of about $200 million to the account at J.P. Morgan occurred Oct. 28. The money was moved to a U.K. account for MF Global from a customer-segregated account, passing through another trading account on its way, people familiar with the matter said. 

To be sure, it is possible that company officials 
mistakenly(sic) dipped into customer-segregated funds as MF Global scrambled to meet margin calls and other demands after MF Global debt was downgraded in late October...
E-Mail Clues in Tracking MF Global Client Funds
By Ben Protess and Azam Ahmed
December 20, 2011, 9:00 PM

Federal authorities investigating the collapse of MF Global have uncovered e-mails that detail the transfers of money in the firm's last days, including transfers that contained customer money, according to people close to the investigation.

One e-mail chain refers to 
the transfer of roughly $200 million that MF Global owed JPMorgan Chase on Oct. 28 —the firm's last business day before it filed for bankruptcy. In that chain, a senior official in the firm's Chicago office was told to make the transfer, said the people close to the investigation who requested anonymity because the inquiry was still open.

That official, Edith O'Brien, a treasurer at MF Global, is considered a "person of interest" in the investigation
 , said two of the people, who added that authorities expected to interview her in the coming days. It was not clear who had directed Ms. O'Brien, whose job was to oversee the customer money, to make the Oct. 28 transfer. The roughly $200 million that JPMorgan Chase received is said to be entirely customer money... 

1 comment:

Anonymous said...

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