Wednesday, January 4, 2012
Most Lind-Waldock customers have still not been made whole as a result of the bankruptcy of MF Global and the likley improper removal of cash funds and other assets from Lind Waldock by parent MF Global.
It now appears that MF used the banksters at JP MorganChase and Goldman Sachs to complete some, or all, of the possibly illegal transfers. It is not clear whether JPM or GS knew the source of the assets that were involved. But Reuters is reporting the following:
MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co, one of the sources said.
The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.
At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.
JPMorgan spokeswoman Mary Sedarat said the bank did not withhold money because of the line of credit. She declined further comment on details of the transactions.
JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.
The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.
It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.
So here's the likely scenario. MF sells assets to GS. The transaction is cleared through JPM. At the same time, MF is drawing down on its billion dollar plus line of credit with JPM. At some point, JPM gets nervous about the credit drawdown by MF and decides to hold cash due MF from GS, to protect the against the money just lent out via the credit line.(Cash which MF would have used to pay to MF's Lind-Waldock customers )
Immediately following the bankruptcy, just in case JPM is forced to pay the cash due MF, JPM then uses its high priced lawyers to get a lien on some MF assets ahead of MF customers, before anyone else figures out what is going on.
Sweet. And that's how Jamie Dimon rolls.
Source
