By MARK DECAMBRE
The FBI is now on Jon Corzine’s case.
Federal agents yesterday joined the hunt to find out if Corzine’s MF Global mishandled hundreds of millions in client accounts that went missing — at least briefly — just before the broker-dealer filed for bankruptcy.
The FBI launched a preliminary probe that could lead to a criminal investigation, joining an army of regulators poring over the embattled firm’s books, according to sources.
MF is already being investigated by the Securities and Exchange Commission and other federal agencies after shocking allegations that it mingled clients’ dough with the firm’s money — a major no-no on Wall Street.
GOTCHA! MF Global’s Jon Corzine — including Gary Gensler, a former Goldman colleague and head of the CFTC — is being called out by regulators for failing to keep MF funds and customer accounts separate.
An FBI probe would cap a treacherous several days for formerNew Jersey governor Corzine, who is battling questions over his management of the once-staid broker-dealer.
Regulatory agencies have descended on the firm to uncover the details of a possible $700 million cash shortfall and whether the firm’s execs dipped into funds explicitly designated for clients.
At aManhattanbankruptcy court hearing yesterday, MF lawyer Kenneth Ziman told Judge Martin Glenn that all the missing money was accounted for.
“To the best knowledge of management, there is no shortfall,” Ziman said.
But the more alarming issue is that MF brass copped to tapping clients’ money as the firm’s financial woes mounted.
“This whole thing stinks,” said Jon Najarian, co-founder of Optionmonster.com. “There are so many checks and inevitable audits of how you checked and what your procedures are, that it is extremely strange.”
The idea behind keeping client money separate from the firm’s is to guard against clients losing their money because of the company’s gambles.
Yesterday, the Chicago-based exchange CME Group’s CEO Craig Donohue said the exchange “determined that MF Global is not in compliance with CFTC and CME customer segregation requirements.”
“While we are unable to determine the precise scope of the firm’s violation at this time, we are investigating the circumstances of the firm’s failure,” Donohue said during a conference call to discuss the company’s third-quarter results.
Revelations around MF’s sketchy moves emerged during Corzine’s failed attempt to strike an eleventh-hour deal with rival brokerage house Interactive Brokers Group.
In addition to the FBI, the SEC and the CME Group, the Commodity Futures trading Commission has also launched a probe into the firm’s conduct.
On Monday, the Securities Investor Protection Corp. filed a lawsuit against MF Global, demanding that the brokerage arm, which has not filed for bankruptcy, be put through a liquidation to ensure that clients get all of their money.
Corzine, a former Goldman Sachs co-CEO, ran the gold-plated firm for five years before being ousted in a power struggle with Henry Paulson in 1999.
Humbling days may be ahead for Corzine as he confronts former Goldman banker alums like Gary Gensler, who now runs the CFTC.