Corzine Blamed for MF Global Demise: Trustee’s Report

CEO knew firm’s capital and liquidity assumptions were ‘fatally flawed,’ Freeh says.

Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon S. Corzine’s risky business strategies and mismanagement helped accelerate the futures brokerage’s demise, according to a report by bankruptcy trustee Louis Freeh.

The 124-page report blames Corzine and his management team for bungling an expansion of the company’s traditional business model while ignoring deficiencies in its risk controls. Corzine’s “aggressive trading strategy” that invested heavily in European sovereign debt produced no significant revenues, and he and Chief Financial Officer Henri Steenkamp knew that the company’s controls were flawed as early as May 2010, according to the filing today in U.S. Bankruptcy Court in Manhattan.

Estimated Losses

Freeh estimates the losses to MF Global and its finance subsidiary from $1.5 billion to $2.1 billion. The trustee for the company’s operating brokerage, MF Global Inc., estimated a shortfall of $1.6 billion in customer funds, and has been distributing payments to former customers in a wind-down proceeding that is separate from the Chapter 11 liquidation of the parent company.

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