After a Delay, MF Global’s Missing Money Is Traced

By BEN PROTESS and AZAM AHMED
Louis Freeh, a former F.B.I. director, and James Giddens, below, a partner at Hughes, Hubbard & Reed, are MF Global trustees.Alex Wong/Getty ImagesLouis Freeh, a former F.B.I. director, and James Giddens, below, a partner at Hughes, Hubbard & Reed, are MF Global trustees.
Chip Somodevilla/Getty Images

Investigators have determined what happened to nearly all of the customer money that disappeared from MF Global around the time of its bankruptcy last Oct. 31, but have not publicly disclosed their progress, fearing that doing so might cripple efforts to recover the cash and pursue potential wrongdoing, people briefed on the investigation said.

While authorities have traced hundreds of millions of dollars to banks, MF Global’s trading partners and even the firm’s securities customers, investigators remain uncertain about whether they can retrieve the money.

Some recipients were entitled to payouts from MF Global, which could make clawing back the money difficult. For instance, securities customers withdrawing their money as MF Global began to collapse were paid from accounts that belonged to futures clients, according to other people briefed on the matter.

But the Commodity Futures Trading Commission, the regulator leading the investigation, will examine whether anyone accepted customer cash without verifying the source of the money, one of the people briefed on the matter said.

This person and others who discussed the case did so on the condition of anonymity because the investigation is not public.

The findings shift the pressing question surrounding the collapse of MF Global from what happened to the money to how to recover it and who is at fault.

Answers will not come easy. A significant impediment has been clashes among the parties trying to resolve the MF Global mess: three federal agencies and two bankruptcy trustees.

At the center of the squabbling are e-mails sent by top executives at MF Global — communications that have been withheld from federal authorities, according to the people briefed on the matter. Investigators suspect the e-mails, sent just before the firm collapsed, contain clues about who transferred the money from protected customer accounts.