Corzine Set to Reach a $5 Million CFTC Deal on MF Global

  • Regulator accused Corzine of failing to supervise unit
  • MF Global filed for bankruptcy in 2011 after wrongway bets

Jon Corzine.

Photographer: Andrew Harrer/Bloomberg

Jon Corzine is close to reaching a tentative agreement to resolve a U.S. regulator’s allegations that he failed to properly oversee MF Global Holdings Ltd. as the brokerage unit spiraled toward failure almost five years ago, according to a person with knowledge of the matter.

Corzine, 69, who earlier served as New Jersey’s governor, a U.S. senator and the co-chairman of Goldman Sachs Group Inc., may pay $5 million out of his own pocket to settle the claims from the Commodity Futures Trading Commission, said the person, who asked not to be identified because the talks are private. The regulator is also seeking a lifetime ban from personally trading other people’s money in the futures industry.

The tentative agreement may be announced by the end of the year. The New York Times and Wall Street Journal reported the news earlier Thursday.

Andrew Levander, a New York lawyer representing Corzine, didn’t return requests for comment left with his office after regular business hours.

Cash Shortage

The CFTC alleges Corzine didn’t fix inadequate controls that led to $1 billion in missing customer funds, that he was aware of the New York-based firm’s extreme shortage of cash and that he didn’t ask questions about the origins of funds used to make transfers that he ordered.

Corzine has previously argued that he never requested any misuse of customer funds to help his firm stay afloat as it dealt with margin calls on bad bets. He testified to Congress under subpoena and under oath that he asked that overdrafts with JPMorgan Chase & Co. be corrected.

Corzine joined the futures brokerage in March 2010 with a plan to remake the company into an investment bank in the image of Goldman Sachs, where he had been spent his career before entering politics. Corzine increased the firm’s risk and used its own money to trade, including investments in European sovereign debt that were rattling markets.

The firm owned $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt in October 2011, a week before it filed for Chapter 11 bankruptcy in New York. The brokerage’s parent listed debt of $39.7 billion and assets of $41 billion.

In 2013, the brokerage unit was fined $100 million by the CFTC and admitted regulatory failures.

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