Shannon Stapleton / Reuters
The sign marking the MF Global Holdings Ltd. offices at 52nd Street in midtown Manhattan is seen in New York November 2, 2011, two days after MF Global filed for bankruptcy protection.
Who knew what and when about an estimated $1.2 billion worth of client finds missing from the accounts of now-bankrupt broker MF Global Holdings Ltd?
The answer to that question is vexing a slew of regulators, the FBI, and of course the clients who would like their money back. Published reports Tuesday said $200 million worth may have been transferred to an MF Global account at JPMorgan Chase three days before the brokerage filed for bankruptcy protection on Oct. 31.
The New York Times reported that federal authorities probing where the missing money went have discovered an email chain that discusses the transfer of the funds to JP Morgan on Oct. 28. The email chain includes instructions to Edith O'Brien, a treasurer at MF Global's Chicago office, to make the transfer, the Times reported, citing people close to the probe who requested not to be named because the inquiry remains open.
O'Brien, the Times said, is considered a "person of interest" in the probe. She has not been charged with anything and may even have made the transfer without knowing it was customer's money. It's not clear who gave O'Brien the instructions. She is expected to be interviewed in the coming days, according to two of the sources, the Times said.
The newspaper said O'Brien could not be reached for a comment and a spokesman for the Commodity Futures Trading Commission declined to comment.
The Wall Street Journal reported that JP Morgan itself may have raised warning flags about the money in a letter asking MF Global whether the transfer of the $200 million ran afoul of rules governing the use of customer funds. The Journal said JPMorgan accepted the money to cover an overdraft at MF Global's proprietary trading account. It's not clear if JPMorgan still has the funds, the Journal said.
The newspaper also said a person familiar with JPMorgan's operations normally wouldn't ask for assurances about the transfer of funds to the proprietary account, but the timing of the move, amid rising financial problems at MF Global, led the bank to decide it was prudent to inquire.
MF Global, which was run by former New Jersey Governor Jon Corzine, also a former Democratic senator from that state, filed for bankruptcy protection on Oct. 31 after succumbing to a series of bets on European debt that went sour. Investigators have been probing whether MF Global used client funds, in violation of CFTC rules and standard practices, to shore itself up.