Troubled Wall Street firm investigated for shortage of client cash

Nov 1, 2011, 22:53 GMT

New York - MF Global Holdings, which filed for bankruptcy earlier this week, is being investigated over a possible shortfall of client funds, The Wall Street Journal reported Tuesday.

The Federal Bureau of Investigation is looking into whether the firm is short money, and if so where it went and whether a crime was committed, an unnamed sourced told the newspaper.

The broker-dealer firm, and its finance unit, MF Global Finance USA, Monday filed for reorganization under US bankruptcy law after losing its bets on European sovereign debt.

The MF Global Holdings bankruptcy was the first large victim on Wall Street of the roiling euro debt crisis. In Europe earlier in October, the Belgian-Franco-Luxembourg bank Dexia sought rescue by the Belgian government, pending final clearance from European Union antitrust regulators.

Earlier reports had indicated some 700 million dollars in client funds could be missing.

In its filing for Chapter 11 bankruptcy, MF Global listed total debt of 39.7 billion dollars and assets of 41 billion dollars. The finance unit listed debt of 50 million dollars and assets of 500 million dollars.

MF Global is largely unknown in the public, but well known in the financial world as a player. The brokerage house works closely with hedge funds in developing their business with currency trading, derivatives and raw materials.

The firm had bought bonds from Spain, Ireland, Portugal and Italy in the belief that the eurozone would quickly recover from its debt crisis. MF Global recently said it had invested 6.3 billion dollars in its European debt portfolio.