After spending the entire weekend trying to sell his company, MF Global, Chairman Jon Corzine finally capitulated, and his board declared bankruptcy on Monday morning, October 31. It was during negotiations with a potential suitor for the business, Interactive Brokers (IB), that word leaked out that customers’ monies were missing, and IB left Corzine to fend for himself. A board meeting was hastily called and ended Corzine’s dream of building another Goldman Sachs with other peoples’ money.
It isn’t as if the regulators were asleep. According to the New York Times, alarm bells went off last June when regulators from the Financial Industry Regulatory Agency (FINRA) first discovered that Corzine had gone long in a huge bet on sovereign debt from Italy, Ireland, and “other troubled European nations,” including Belgium, Spain, and Portugal, expecting the European crisis to be resolved favorably and his holdings to increase in value. When FINRA learned that he had leveraged his bet between 30:1 and 40:1 with his customers' money, FINRA asked him to increase his company’s capital in case his bet went wrong.
Corzine called FINRA’s bluff and flew to Washington to speak directly with top officials at the Securities and Exchange Commission (SEC) without success. He was forced to increase the company’s capital, buying the company a little time.
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Photo of Jon Corzine: AP Images