The US Senate plans to investigate the MF Global Holdings Ltd. bankruptcy and the role of its primary regulator, the Commodities Futures Trading Commission (CFTC).
US Senator Chuck Grassley, R-Iowa leads the investigation into the bankruptcy of brokerage MF Global Holdings Ltd. MF Global collapsed after holding over $6 billion in European sovereign debt. Rating agencies recently downgraded the debt to just above junk status. Over $600 million in client cash was reportedly missing from MF Global’s books. As a result of the bankruptcy, employees lost compensation and investors lost savings meant for college tuitions, retirement, and other financial needs.
Since Lehman Brothers in 2008, MF Global is the largest financial institution bankruptcy. The MF Global bankruptcy will surely drag on for years like the Lehman Brothers bankruptcy, with investors on the edge wondering when they will get their money back, if at all.
Of concern to the Senate investigation is the decision by the CFTC Chief Gary Gensler to recuse himself from the CFTC investigation because of a relationship with MF Global’s former CEO Jon Corzine. Gensler and Corzine used to work together at Goldman Sachs, and in Washington during when Corzine was US Senator and Gensler a staffer to former Senator Paul Sarbanes.
Gensler indicated CFTC did not give MF Global any special treatment as a result of his relationship with Corzine. He said his decision to recuse himself from CFTC’s investigation was to avoid distractions from the investigation.
Besides the Senate and CFTC investigations, MF Global faces SEC and FBI scrutiny. The FBI is investigating MF Global for commingling company and client funds.
Finally, according to Sen. Eyes MF Global Collapse After CFTC Chief Exits Probe,” Law360.com, November 7, 2011, MF Global is the target of shareholder litigation.
Contact an experienced New York bankruptcy attorney for counseling on bankruptcy proceedings.