CME Group Executive Chairman Terry Duffy dropped a bomb, in the words of Sen. Pat Roberts (R. Kan.), during a hearing of the Senate Committee on Agriculture on MF Global.
In a new revelation, not part of written testimony or testimony provided last week to the House Committee on Agriculture, Duffy stated that a senior MF Global employee informed a CME auditor that former MF Global Chairman and CEO Jon Corzine knew of the transfer of customer funds out of segregation .
Duffy said, “A CME auditor also participated in a phone call with senior MF Global employees where in one employee indicated that Mr. Corzine knew of the loans made from the customer segregated accounts.”
He went on to say CME Group has shared this information including the names of the individuals involved with the Justice Department and the Commodity Futures Trading Commission (CFTC) who are investigating.
He also pointed out that on Monday Oct. 31 MF Global revised it segregated account report for Thursday Oct. 27 to show a $200 million shortfall instead of a $200 million excess as previously reported to CME.
“This shortfall on segregation on Thursday Oct. 27 was hidden by the inaccurate report, a telling sign to keep regulators in the dark,” Duffy said.” It remains to be seen whether this failure to disclose permitted additional segregated funds to be improperly transferred.”
He added, “Transfers of customer funds effectuated by MF Global management for the benefit of MF Global constitutes very serious violations of our rules.”
Earlier in the hearings, Corzine testified that he “never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds.”
It was unclear if the MF Global employee was referring to the $900 million shortfall that Duffy stated MF Global informed the CME and CFTC was moved out of segregation on Monday or a separate $170 million transfer to London.