MF Global transferred US $200m from a customer account at JP Morgan to cover its own US $175m overdraft just three days before it collapsed, a US congressional inquiry has heard.
According to a memo prepared for congressional members examining the broker-dealer’s failure, Jon Corzine, the former chief executive of MF Global, is alleged to have authorised the transaction three days before the collapse.
The allegation that the transfer was ‘as per JC’s direct instructions’ has made international headlines around the world and have led to speculation that a number of transfers eventually led to the hole in customer funds.
It is still unclear whether Corzine played a significant role in the transfer of customer accounts in order to bankroll the company’s losses, however.
Ratings agency downgrades had led to significant pressure on the business as did JP Morgan’s decision to put and end to the business’s credit line.
In January, Insolvency News reported that former clients of MF Global UK were told that they had had their ‘client status’ recategorised just days before the firm entered administration meaning they missed out on the redistribution of cash in February.
Speaking at the time, Alun Srivastava, head of Baker & McKenzie’s financial group in London, said a number of customers of the brokerage received a letter just days before confirming the switch.