[ by Melanie Gretchen ] We've all heard many accounts of the MF Global story - at least what appeared to take place over the last week of October - just prior to the firm's collapse on October 31, before goblins came out to celebrate Halloween. Under the direction of Jon Corzine - once governor of New Jersey - $1.2 billion, about a third of customer money, went missing.  Presumably sometime in late October.  But where did it go?  Who handled the funds, and thus, may have had a role in its disappearance? Investigators have assembled parts of the puzzle.  But with an interesting chronology put together by NYTimes reporter Ben Protess, we can follow the flow of money at MF Global as far back as the summertime - or at least we can begin to understand the workings behind the firm's use of customer moneys.  In some ways it makes sense - what's not clear is exactly when and why the system broke down. Summer 2011. As is common practice among brokerage firms, MF Global legally  borrowed client funds to buy assets like corporate bonds.  By law, the firm was required to put up sufficient collateral - assets like U.S. Treasury's to cover the borrowed customer funds.  [C-I Note: This practice is very revealing to those who are not familiar with the practice of borrowing customer cash - and it's quite confusing before all we've heard and read in the media is that the firm committed a serious Wall Street sin - taking money out of customers' segregated reserve accounts.  Well, as we see, it's not against the rules to borrow - though its against the rules and all human decency to take money out and put nothing back in its place - not even a 'place card.'] August 2011. As early as August, it is alleged that MF Global might have taken customer money without putting up sufficient collateral. October 21. About 1 week prior to filing for bankruptcy protection, on 10/31/11, the firm used funds in customer accounts.  Because MF Global and brokerage firms in general often maintain excess collateral against their  borrowings of money from in customer accounts, it's conceivable that MF Global acted legitimately. October 27. The storage or excess collateral now was gone.  Nevertheless, MF Global moved customer money from the futures side of the firm to the securities side - possibly to settle its securities trades. Anticipating a possible sale of the firm, MF Global closed out numerous trades - to generate liquidity and to improve its balance sheet.  Yet, all the while, the firm may have been moving client money to middleman DTCC (Depository Trust & Clearing Corporation), according to federal authorities - without thinking that there may not have any storage or excess collateral on which to borrow against.  [C-I Note: Would such a mistake be human error or intentional fraud?  It's possible that the tremendous numbers of trades simply flooded the settlement desks - leaving back office personnel to push out paper and any found cash out to the respective counterparties.] October 28. On Friday, the last business day before MF Global filed for bankruptcy, JPMorgan Chase told Corzine that the firm had overdrawn an account at the bank in its London branch.  Corzine testified before Congress that he passed the request on to his staff. One of the staffers instructed Edith O'Brien, a treasurer at MF Global's Chicago office - who had overall responsibility for customer reserve balances - to replenish the overdrawn account.  It is here that authorities suspect $200 million of what's now viewed as missing customer money was used to cover the JPMorgan-London overdraft.  If so, was Ms. O'Brien or one of her associates aware that the firm no longer had excess collateral that would enable it to legally borrow from customer accounts?  That remains to be determined. After JPMorgan received the transfer, an officer of the bank asked Corzine about the source of the money - in his testimony, he answered that, as he recalled, Ms. O'Brien assured him that the firm was not improperly using customer cash.  Although she is a "person of interest" in the investigation, according to two people close to the case, there is no evidence that she knowingly transferred customer money. October 30. On Sunday, the firm had closed in on a deal to sell part of the firm to Interactive Brokers Group, a rival brokerage house.  By 6 p.m., it is said that MF's general counsel, Laurie Ferber, notified the CME Group - MF Global's regulator in the sovereign debt swap transactions that apparently created the shortfall in customer funds and led to the firm's collapse.  Ms. Ferber initially blamed on an accounting error, according to the CME. By 2 a.m. the story had changed, when Ms. O'Brien and other MF Global officials told CME that $700 million was sent from customer accounts to the firm's securities unit. October 31. By 10 a.m., the following Monday, the firm filed for bankruptcy while federal regulators began searching for the still-elusive $1.2 billion (originally thought to be about $750 million). Week of December 12. Facing former colleagues on Capitol Hill, Corzine denied the accusation by Terrence Duffy, executive chairman of the CME Group, that MF Global had used customer money to lend from one arm of the firm to the other, to Corzine's full knowledge. "I never gave any instructions to misuse customer money, never intended to give any instructions or authority to misuse customer funds, and I find it very hard to understand how anyone could misconstrue what I've said as a way to misused customer money." If only following the money were so easy here.  Hope this clarified the picture for you. [Dealbook, 12/30/11]