MF Global improperly diverted customers’ cash for its own use in the days before its bankruptcy, an act that regulators believe may help explain why $600 million of customer funds remains missing, people briefed on the investigation say.  At least some of that money was used to cover trading losses at MF Global, regulators suspect, meaning the money may no longer be simply missing. It may be gone. The  firm run by Jon Corzine,  like other brokers, can use customer cash if it puts up sufficient collateral.  Investigators have now zeroed in on hundreds of millions of dollars in suspect borrowing saying the firm did not provide enough backing in late October, essentially taking free loans.  Then as customers rushed to withdraw money while the firm was teetering on the brink of bankruptcy, that questionable borrowing worsened a liquidity crisis at the firm. It is unclear what MF Global did with all of the money or whether it can be recovered. The firm may have used some of the cash to keep its own lenders at bay, which means the money could be sitting in an account at another firm. And some of the $600 million may yet materialize. As a patchwork of federal agencies and the trustee overseeing the firm’s liquidation reconstruct MF Global’s books, they expect to find that in the chaotic last days the firm failed to record when some customers received their money. But a big chunk will most likely be much harder to recover, the people say, because it was used to pay off losses, rather than back trades. For more info, go to [Dealbook 11/17/11]