MF Global sold assets to Goldman before collapse - sources

Wed Jan 4, 2012 9:49am IST

A woman leaves the office complex where MF Global Holdings Ltd have an office on 52nd Street in midtown Manhattan October 29, 2011. REUTERS/Andrew Kelly/Files

A woman leaves the office complex where MF Global Holdings Ltd have an office on 52nd Street in midtown Manhattan October 29, 2011.

Credit: Reuters/Andrew Kelly/Files

Related Topics

Stocks

   

REUTERS - MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co, one of the sources said.

The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transactions were cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.

JPMorgan spokeswoman Mary Sedarat said the bank did not withold money because of the line of credit. She declined further comment on details of the transactions.

JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.

The Wall Street Journal previously reported that George Soros' fund was a buyer of securities sold by MF Global, scooping-up some of its European sovereign debt at a deep discount. Panic among investors and clients about MF Global's $6.3 billion bet on European sovereign bonds led to its demise.

Corzine, who was CEO of MF Global at the time of the collapse, headed Goldman Sachs from 1994 to 1999 before being ousted after a power struggle with co-CEO Henry Paulson.

Corzine and other top MF Global executives reached out in desperation to Goldman Sachs Group Inc (GS.N) and JPMorgan, as well as Jefferies Group Inc JEF.N Barclays Plc (BARC.L), Citigroup Inc (C.N), Deutsche Bank AG, Macquarie Group Ltd (MQG.AX), State Street Corp (STT.N) and Wells Fargo & Co, as potential buyers in its final days as the firm teetered toward collapse, Reuters earlier reported.

(Additional reporting by David Henry; editing by Martin Howell and Andre Grenon)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Jan Dhan Yojana

REUTERS SHOWCASE

Chance For Reform

Chance For Reform

India's coal crunch - a chance to revamp, reallocate and revive.  Full Article 

E-Commerce

E-Commerce

Ratan Tata invests in online retailer Snapdeal.  Full Article 

Top Priority

Top Priority

Finance minister says food inflation is top priority.  Full Article 

Deal Talk

Deal Talk

Who wants to buy Snapchat? Microsoft, Google, Apple, Alibaba.  Video 

Fresh Funding

Fresh Funding

Tiger Global leads $65 million funding in Indian messaging app Hike.  Full Article 

GDP Preview

GDP Preview

Economy likely grew faster in June quarter: Reuters poll.  Full Article 

Safety Net

Safety Net

SEBI revamps trading safety-net rules.  Full Article 

Fraud Investigation

Fraud Investigation

IMF's Lagarde put under investigation in French fraud case.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage