The following article is an account of what I wrote shortly after Jon Corzine emptied my segregated trading account at MF Global leaving me with very few options of getting it back.
“Nemo est supra legis” is a latin saying that means “No man is above the law.”
Late October 2011 I booted up my computer and logged in to my futures account that I had set up with Etrade, who were using MF Global as the clearing company. I checked out the levels on the ES minis, the bonds, and then gold futures. Then I glanced over at my account. “0000.00”, is what I saw. “Mmmm, that’s strange, probably just a technical glitch,” I thought. Strangely enough, I didn’t panic. After all, it was a segregated account so no worries, right?
I happen to look over at the news feed and suddenly I see headlines flying by about “MF Global may have to declare bankruptcy”, “MF Global under severe financial strain” and on and on, as the number of headlines accumulated throughout the day. I thought, “wait a minute, MF Global is a clearing firm. How can they go bankrupt?”
I had this same experience in 2008 when Etrade was close to declaring bankruptcy. I learned at the time that I had nothing to worry about because client segregated accounts had nothing to do with the finances of the company. Client cash was safe.
Then I started to panic when I saw, “MF Global uses client funds to cover huge losses!” “What the hell???” I called Etrade, since they were the introducing brokers. “Shit, it is busy.” I tried another number of theirs, “Damn! Busy.” Finally it started ringing. “Ok, now we are getting somewhere. I am going to get this sorted out.” A recording!! “Because of the high volume of calls into our customer service center we cannot assist you at this time. Call back later.” I tried MF Global directly. Busy, busy busy; everywhere it was busy. It was starting to become clear that has a small player in this violation I had very little in the way of options to protect myself.
I had to find out what was really happening here. I took to Google and started searching furiously for any additional news I could find. Bit by bit, piece by piece a clearer picture started to develop. Every financial media organization was now all over this story. The truth was now starting to come out.
MF Global made a $6.3 billion investment on its own behalf in bonds of some of Europe’s most indebted nations. Failure of those, and other, repo positions contributed to a massive liquidity crisis at the firm. It got better. Apparently MF Global experienced a number of trading days in 2011 during which the firm's bets on sovereign debt had required the use of customer funds to meet capital requirements.
I thought back to my Etrade experience a few years before. What about the segregated accounts? Segregated accounts were normally secured even in bankruptcy. It all turned out to be a bunch of BS. That meant my bank accounts were not safe. What was safe?
As the days passed I started seeing the name Jon Corzine. “Corzine? Who is this joker?” I asked myself. I wasn’t familiar with the name Corzine before this fiasco. A quick Google search established that he was an Ex Goldman Sachs CEO, Ex Governor of New Jersey where he left a string of scandals, before being eventually losing to Chris Christie before being named as Chairman and CEO of MF Global.
So now it had become clear. The spectacular meltdown of MF Global and its financial condition, directly caused by improper transfers of over $891 million from customer accounts, including mine, to a MF broker-dealer account to cover losses created by trading losses. Many sources indicated Corzine was heavily involved with the sovereign debt trades that led to the company's downfall, indicating the firm took on the positions at his urging as CEO and Chairman. Well thanks for nothing Jon!!!
About 150,000 MF Global client accounts were frozen after the discovery of the missing funds. The fallout started to become more real as I read about other clients.
-In addition to her clients' funds, a CTA also had money at MF Global. She said she transferred over $100,000 just two weeks before the collapse because "the industry sold itself to the public as safer than a bank." She hadn’t taken any trading positions with her money.
There were those that did take trading positions and were locked out. The trades that went against them were left without any loss protection. They were liquidated as is. And even if they got their money back they still took a huge hit on positions that they couldn’t close.
“That could have been me,” I thought. “This could have turned out a lost worst for me. I could have had everything in there.” Those thoughts did nothing to alleviate my anger that started to build.
As the months went by I started receiving letters from every parasite in the business offering to purchase my claims for a fraction of what I lost. I was getting at least one every two weeks. They were hoping to purchase claims from clients with the intention of making money off of an eventual payout by the trustees. “Screw you”, I thought. I was ripped off. I am not negotiating anything.
In 2014, after 3 years of waiting, all MF Global customers who had not sold on their debt claims were repaid in full. Did I feel better about getting that last check? Well first of all, I got paid in installments by a freaking check each time, which I had to pay fees on to get it cashed. I was also told to cash it as soon as I could because they could not guarantee the funds would be there long. Wow! Quite honestly I felt like an under paid actor being cast in a low budget Porno being made to take it from all directions. No, I was not too happy about that!
To add insult to injury, I would sit and watch the financial media portrait Jon Corzine as an upstanding financial guy, good buddy of the President, smart businessman etc., and just the other day I read where he is starting a hedge fund!! In addition, someone on CNBC stated that the Corzine bet would have paid off in the end. But HE COMMITED A CRIME!! Has greed and lack of morality become so bad and engrained in our system that it is no longer obvious? “Nemo est supra legis?” I am sorry to say but in our world today that statement is a load of horseshit!