Updated
The U.S. Commodity Futures Trading Commission filed an enforcement action on Thursday alleging unlawful use of customer funds and other violations against MF Global Inc. and its parent company, MF Global Holdings Ltd.
Jon S. Corzine, chairman and CEO of MF Global and MF Global Holdings, and Edith O'Brien, assistant treasurer of MF Global, also were charged in the civil case filed in U.S. District Court in Manhattan, according to a news release from the CFTC.
MF Global and MF Global Holdings were charged with: misuse of client investment funds; failure to segregate client funds; failure to provide adequate supervision; making misleading statements; and reporting violations.
MF Global has agreed to settle the CFTC's charges by repaying all of the approximately $1 billion lost by its commodity customers in October 2011 — when MF Global collapsed — and $100 million in penalties. The settlement was approved by the firm's bankruptcy trustee, James W. Gidden, according to the final consent court settlement.
The settlement is subject to U.S. District and Bankruptcy court approval, according to the release. MF Global filed for Securities Investor Protection Act bankruptcy protection on Oct. 31, 2011.
Mr. Corzine was charged “as a control person” with failure to segregate funds and misuse of customer assets as well as failure to supervise in his role as MF Global's CEO. Ms. O'Brien was charged with aiding and abetting the failure to segregate and misuse of client funds.
MF Global Holdings, Mr. Corzine and Ms. O'Brien are not covered by the CFTC's settlement with MF Global. The CFTC said in its release that it seeks full restitution and unspecified monetary penalties from the three remaining defendants. The CFTC also seeks to ban Mr. Corzine and Ms. O'Brien from trading in futures markets.
“This is an unprecedented lawsuit based on meritless allegations that Mr. Corzine failed to supervise an experienced back-office professional who was located in a different city and who did not report to Mr. Corzine or even to anyone who reported to Mr. Corzine,” said attorney Andrew Levander, a partner at law firm Dechert, in an e-mail. Mr. Levander is representing Mr. Corzine.
“After 20 months of thorough investigations by the Department of Justice, two bankruptcy trustees and the CFTC, no evidence has been found that contradicts Mr. Corzine's sworn testimony before Congress. Mr. Corzine did nothing wrong, and we look forward to vindicating him in court,” Mr. Levander added.
