MF Global, the securities firm led by former Goldman Sachs chief and former New Jersey Gov. Jon Corzine, has admitted to using clients’ money as its financial troubles mounted, a federal official said Tuesday.
An MF Global executive made the admission to federal regulators in a phone call early Monday after regulators discovered money missing from clients’ accounts, The Associated Press reported, citing an official familiar with the conversation.
The official spoke on condition of anonymity because he was not authorized to discuss a preliminary investigation by federal regulators.
Government rules require securities firms to keep clients’ money and company money in separate accounts. Violating the rule could result in civil penalties.
MF Global, which filed for bankruptcy protection Monday, faced a cash crunch after making multibillion-dollar bets on European sovereign debt.
Hundreds of millions of dollars of customer’s money have gone missing from the brokerage firm, sources told The New York Times.
The discovery of the missing millions stopped a last-minute deal to sell a major part of MF Global to another brokerage firm from going ahead, The New York Times reported.
The company’s main exchange regulator, CME, said earlier Tuesday that MF did not separate its customers’ accounts from the firm’s funds as required by law, Reuters reported.
The Associated Press and Reuters contributed to this report.