Brazen Pre-Bankruptcy Asset Transfer Surprises Finance World

Bankrupt securities firm MF Global allegedly transferred millions in missing client funds last week right before filing bankruptcy.  If true, the money transfer could cause serious problems in the firm’s bankruptcy case:

CME’s statement suggests that MF Global executives rushed hundreds of millions out of client accounts as bankruptcy loomed. The company acknowledged that the money was missing early Monday morning.

“If they transferred funds that fast, it was brazen – an act of desperation to try to save themselves at all costs,” said Mark Williams, a former Federal Reserve examiner who is now a lecturer at Boston University.

Approximately $600 million in client cash is still missing and the FBI is conducting an investigation into possible criminal charges against the firm which is now in bankruptcy.

What will happen if the allegations of asset transfers are true?  The bankruptcy trustee in the case could reverse the transfer; that is if the cash was not already spent.  If the cash is missing, the bankruptcy trustee may need to work to find the culprits and force them to return the assets to the bankruptcy estate.  Unfortunately for the clients whose money went missing, they may be forced to get in line with other creditors to get their money back in bankruptcy. This will all depend on how the transfers were made and in what context.  Were they just a part of doing business, such as brokerage fees etc.?  Or, were they brazen acts in thievery?  The FBI investigation and bankruptcy officials may be best suited to make that determination.

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