Corzine Agrees to Futures Industry Ban in CFTC Settlement

  • Former chief of MF Global to pay $5 million in penalty
  • Firm misused almost $1 billion in customer funds in 2011

Jon Corzine has agreed to a lifetime ban from the futures industry to settle a U.S. lawsuit that he failed to properly oversee MF Global Holdings Ltd. as the brokerage spiraled toward failure in 2011.

Corzine, an ex-governor and U.S. senator from New Jersey and the former co-chairman of Goldman Sachs Group Inc., also agreed to pay a $5 million penalty from his own pocket to the Commodity Futures Trading Commission, under a consent order approved by a federal judge in New York Thursday. The agency had been seeking the industry ban since at least October.

"I am pleased to have reached this settlement to resolve the CFTC’s claims," Corzine, 70, said in a statement. "As the CEO of MF Global in 2011, I have accepted responsibility for its failure, and I deeply regret the impact it had on customers, employees, shareholders and others.”

Under the agreement, Corzine can’t register with the CFTC in any capacity and is barred from acting as a principal, agent, officer, director or employee of a Futures Commission Merchant. He also can’t seek reimbursement of the $5 million penalty from insurance or elsewhere.

Corzine remains free to engage in futures trades that are exempt from CFTC registration and isn’t limited from trading in other markets.

Steep Fall

“It’s been a very steep, but slow motion fall,” said Charles Geisst, a finance professor at Manhattan College. “The securities industry catches up with lots of people and Corzine certainly turned out to be one of them.”

The CFTC claimed Corzine failed to fix inadequate controls that led to $1 billion in missing customer funds and knew of the New York-based firm’s extreme cash shortage. The agency also said he didn’t ask questions about the origins of funds used to make transfers that he had ordered.

Corzine previously said he never directed the misuse of customer funds to help his firm stay afloat as it dealt with margin calls on bad bets in 2011. He testified to Congress that he asked that overdrafts with JPMorgan Chase & Co. be corrected. In 2013, MF Global’s brokerage unit was fined $100 million by the CFTC and admitted regulatory failures.

The case is CFTC v. MF Global Holdings, 11-cv-07866, U.S. District Court, Southern District of New York (Manhattan).

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