Opalesque-Strips It Down And Tells It Like It Is
- Posted by Jeff Carter
- on December 12th, 2012
Howard Cosell used to say, “telling it like it is”. In today’s world, most of the time when you tell the unvarnished truth, you get penalized for it. In this “totally transparent” hyper social mocial world, people have become less transparent and truthful. That’s why when you hear the truth, it’s often hard to swallow. Immediately we think of agendas and grand schemes and try to find ulterior motives behind the person telling the story.
I met Mark Melin a while ago after the MF Global dustup. More than a dust up really, it’s outright fraud. Jon Corzine defrauded his customers of money, and took down an entire industry, not to mention a company. The bad news for everyone is that Corzine has a pretty good pal in the White House that will protect him. So, he has been free from prosecution so far.
The wheels of justice spin slowly sometimes. But they spin. Melin has just published his latest Opalesque newsletter. Here are some tidbits.
The U.S. financial system is in a bad relationship with a criminal element.
It is a minority, yet this minority has been allowed to operate with impunity.
This relationship is abusive in nature. The criminal element takes from society,
damages markets that are relied upon for price stability, and yet are
protected – a documented fact. And we’re not just talking about HSBC, which
was laundering money for Iran and Mexican drug cartel rulers.
MF Global executives Jon Corzine and his longtime legal consigliere,
Laurie Ferber, are bad relationships the ruling government needs to
assess in the light of day. Evidence suggests MF Global executives were
aware of the improper nature of illegal asset transfers that resulted in the
most significant damage to regulated derivative markets in history. As if
to insult the intelligence of all watching, Mr. Corzine initially testified in
Congress he “did not know,” and had “no recollection” where customer
funds went. Funds must have “vaporized.” He knew, it was later proven. But
that’s just the start. He knew – but more brazen, MF Global had received
warnings from JP Morgan and regulators but proceeded with the illegal
But wait, there is more.
MF Global used customer segregated funds to pay for Ongoing
business expenses. Evidence suggests certain executives in the
firm, including Jon Corzine, were aware the asset transfers were
improper. Mr. Corzine is the former Senator for and Governor of
New Jersey, a former trader and president at an investment bank until
he was removed from that position. He testified under oath he was
unaware of the funds transfer.
Prior to what is documented to be an illegal asset transfer, MF Global
executives were instructed by regulators not to transfer assets
from customer segregated accounts. The next day assets were
transferred out of segregated accounts in a documented violation of
the Commodity Exchange Act (Rule 1.20). This activity was hidden
from regulators on the scene because reports relied upon to
monitor asset transfers contained false and misleading information,
which was submitted by MF Global employees without backup.
“I think the false report could be a critical issue,” said Anita Krug,
who teaches securities law at the University of Washington in
It is one asset transfer that is the focus of knowledgeable participants.
Essentially, MF Global sent an order to its banker, JP Morgan ($JPM), to
move funds from MF Global’s customer 4 D segregated account at
the bank to an unrelated account at JP Morgan. The transfer was
a violation of the Commodity Exchange Act in several locations,
but specifically Rule 1.20. Evidence suggests MF Global executives
were told of the illegal nature of this asset transfer. On the record,
JP Morgan had asked MF Global to sign a comfort letter on multiple
occasions and confirmed that it had received verbal assurances. While
this alone provides evidence the improper nature of the asset transfer
was questioned and discussed between JP Morgan and MF Global,
what other communication took place between the two firms?
“It is nearly impossible to believe that… Corzine was not
in nearly real-time communication with JP Morgan and the
executives in his own treasury department…”
Click over and read the whole accounting of the tawdry affair. It will disgust you, especially in light of what has happened over the past year.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)
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