Clearing house steals money from customers, then goes bankrupt.
Right, so I can't help myself today. Apparently, a giant/enormous clearinghouse somehow managed to use its clients' money to play the stock market, and lost. Clearly illegal, I thought...
http://www.chicagotribune.com/busine...,4783467.story
Quote:
Originally Posted by Reuters
1:46 p.m. CDT, November 1, 2011
MF Global Holdings Ltd., the futures broker that filed for bankruptcy protection on Monday, has admitted to using its clients' money as its financial troubles mounted, Associated Press has reported, citing a U.S. official.
An MF Global executive made the admission to federal regulators in a phone call early Monday, AP reported.
MF Global did not keep its customers' money separate from its own, CME Group CEO Craig Donohue said on Tuesday.
"CME has determined MF Global is not in compliance with Commodity Futures Trading Commission and CME customer segregation requirements," CME Group Inc Chief Executive Craig Donohue said.
Mixing customer funds with company money violates a key tenet of futures brokerage. Donohue's statement on Tuesday raises questions about statements from CME and other exchanges as recently as Friday that MF Global was a clearing member "in good standing."
"It is always the case that customers have the risk of other customer losses in the customer segregation pool," Donohue told investors on a conference call. "There's always the risk as well that customer funds are not properly protected."
MF Global became the most high-profile victim so far of the euro zone debt crisis, and revived memories of the collapse of Lehman Brothers in 2008 that triggered turmoil in global financial markets.
Federal regulators have discovered that hundreds of millions of dollars in customer money had gone missing from MF Global, the New York Times reported.
Donohue said CME is looking into exactly what happened at MF Global, but cannot now precisely determined the scope of its violation.
He said any losses at MF Global "doesn't really present a clearinghouse issue."
I don't understand this though:
Quote:
"It is always the case that customers have the risk of other customer losses in the customer segregation pool," Donohue told investors on a conference call. "There's always the risk as well that customer funds are not properly protected."
Is he saying this is an expected risk, or it is a risk because the company could be doing this illegally?
Jail really helps markets, I think. People need to go to jail.
Speaking of jail. It's an interesting contrast with the sandwich story, innit? Couple accidentally "steals" $5 worth of over-priced sandwiches: they get arrested. Top executives literally steal what is probably going to be hundreds of millions if not billions of dollars: IT'S OKAY!