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MF Global Sold Assets to Goldman Pre-Collapse
January 4, 2012
[ by Melanie Gretchen ]
MF Global sold hundreds of millions in securities to Goldman Sachs on 10/27/11 - just days before its Halloween Day collapse, according to 2 MF Global employees with direct knowledge of the transactions. While JPMorgan cleared the transaction, MF Global did not immediately receive payment from its clearing firm nor its lender.
It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.
At the same time MF Global was selling to Goldman it was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.
The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.
JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.
JPMorgan spokeswoman Mary Sedarat said the bank did not withhold money because of the line of credit. She declined further comment on details of the transactions.
The Wall Street Journal previously reported that George Soros' fund was a buyer of securities sold by MF Global, scooping up some of its European sovereign debt at a deep discount. Panic among investors and clients about MF Global's $6.3 billion bet on European sovereign bonds led to its demise.
Reuters had earlier reported that MF Global executives also reached out in desperation to Jefferies, Barclays Plc, Citigroup, Deutsche Bank, Macquarie Group, State Street Corp, and Wells Fargo & Co as potential buyers in its final days, as the firm teetered toward collapse.
[Reuters, 1/3/12]
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