Nearly three weeks after $600 million in customer money went missing from MF Global, the search for the cash has been hampered by the bankrupt brokerage firm's sloppy record-keeping, an increasingly worrisome situation that has left regulators frustrated and customers in the lurch.
The round-the-clock effort has consumed an alphabet soup of federal regulators and criminal investigators, with lawyers sleeping at open desks and each agency commandeering a different conference room at the firm's offices. But as authorities comb through some 38,000 customer accounts, they are growing more suspicious about what went wrong at MF Global, the commodities powerhouse once run by Jon S. Corzine, the former Democratic governor of New Jersey.
"The lost money is sort of like a lost child," said Bart Chilton, a Democratic member of the Commodity Futures Trading Commission. "Every day that passes is more and more concerning, and there's less and less hope."
At a bankruptcy hearing on Wednesday, a lawyer for the trustee overseeing the liquidation of the brokerage house would not speculate on the matter, acknowledging simply that the money was still missing.
John Zich/Bloomberg NewsScott O'Malia of the federal commodity futures regulator.After MF Global filed for bankruptcy in late October, hundreds of examiners descended on the firm's New York and Chicago offices. Since then, they have been poring over records, verifying customer accounts and interrogating the skeleton staff that remains.
The futures commission is heading the search in the futures business for the missing $600 million, armed with at least 15 accounting and enforcement staff members on site in New York. The Securities and Exchange Commission is focusing on a separate MF Global unit, as workers report back to bosses in Washington in twice-daily conference calls. Federal prosecutors in New York and Chicago have issued subpoenas, according to one person with knowledge of the matter who spoke on the condition of anonymity.
As part of the effort, the Federal Bureau of Investigation has taken the lead in the interviews of former employees who can explain MF Global's inner workings. The federal authorities have also taken control of an off-site emergency recovery system, where e-mail and phone records from MF Global were stored, said two people who also spoke on condition of anonymity.
Authorities are particularly focused on the final days of MF Global. In the run-up to the bankruptcy filing, clients withdrew their assets, trading partners closed out trades and others demanded more collateral.
Amid the flurry of activity, MF Global failed to register all the transactions in its books. Regulators must now reconstruct the ledger, dollar by dollar.
"The volume and pace of trading activity that occurs at a brokerage firm undergoing a crisis of confidence makes it almost impossible to keep up," said David Pauker, managing director at Goldin Associates, who oversaw the restructuring of Refco, another failed brokerage. "A large backlog inevitably results."
As regulators carve out distinct parts of the investigation, James Giddens, the trustee, is taking a broader perspective. Called in shortly after the firm filed for bankruptcy, Mr. Giddens, who is charged with returning customers' funds, quickly hired the accounting firm Deloitte to create a claims process for customers and Ernst & Young to scour the firm's books. All told, the trustee has amassed a team of more than 200 to unwind the firm, in addition to the roughly 200 MF Global employees who were kept on the job.
The team is trying to understand how the firm operated, which entails interviewing staff members and reviewing of thousands of transactions.
It has been grueling. One lawyer for the trustee returned from his honeymoon and worked a 21-hour day. Another lawyer held a conference call from the emergency room of a hospital where a close relative was undergoing an operation. A group dispatched to Chicago had no time to pack, buying clothes when they arrived.
So far, the trustee has transferred the holdings of about 15,000 MF Global customers to new brokers, along with some of the collateral backing their trades. On Tuesday, Mr. Giddens said he was seeking approval to return 60 percent of the money sitting in separate cash accounts, a move the Commodity Futures Trading Commission supports. A New York bankruptcy court judge is to hear the request Thursday morning.
But many customers are still in the dark about their money. Since the firm's collapse, customers like farmers and small-business owners are struggling to meet their financial obligations.
"The inability of MF Global customers as a whole to access their funds has affected trading in futures markets, and has shaken public confidence in our customer protection regime," Scott D. O'Malia, a Republican member of the futures commission, said in a statement on Wednesday. "To assure the public that MF Global is an isolated incident, the commission should immediately take action." He said the agency should enact new transparency measures and keep a closer eye on futures firms.
At the bankruptcy hearing on Wednesday at a federal court in Lower Manhattan, there were more questions than answers. Judge Martin Glenn asked a lawyer for the trustee if he knew whether customer money had been mingled with company cash, a major violation of Wall Street rules and a potential explanation for the shortfall.
The trustee's lawyer, James Kobak of Hughes Hubbard & Reed, replied: "I don't think anybody knows the answer."
Michael J. de la Merced contributed reporting.
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