The good news concerning MF Global (NYSE: MF) just keeps pouring in. Not only was the firm unable to find a buyer to stave off bankruptcy, but now the reason for Interactive Brokers backing out of the deal at the last minute could cause even more panic among investors. According to the Commodities Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC) and the New York Times, serious concerns have arisen that as much as $700 million in customer funds may be unaccounted for.
Regulators currently are investigating whether the firm may have diverted client funds to prop the investment bank’s own risky positions in foreign government bonds from Spain, Italy, Portugal, Belgium and Ireland.
As of August, MF Global was the eighth largest FCM based on customer segregated funds of $7.2 billion according to CFTC data. That same month, the firm showed an excess net capital of $167 million.
The extent of MF Global’s holdings and risk levels prompted two credit rating agencies to downgrade the bank’s debt to junk status last week. Over five days, the firm lost over 67% of its market value.
For now, there is confusion surrounding the missing MF Global funds, although some are saying the money may just be caught up in the system. Nonetheless, regulators are investigating.