FBI investigating missing money at MF Global

@CNNMoney December 22, 2011: 9:49 AM ET

WASHINGTON (CNNMoney) -- The FBI and federal prosecutors are investigating how some $600 million of MF Global customers' money has gone missing, CNN learned Tuesday from sources close to the probe.

The investigation of MF Global (MF) is being conducted by the FBI and other federal regulators, including the U.S. Securities and Exchange Commission and the Commodities Futures Trading Commission. (MF Global: Sorting through the debacle.)

This past weekend, executives at MF Global had been scrambling to sell the firm to Interactive Brokers, but the missing money cost the firm the deal and forced it into bankruptcy, regulators said.

Earlier on Tuesday, Craig Donohue, CEO of CME Group (CME), the operator of the nation's largest commodity exchanges, told analysts that his firm has determined MF Global had broken government and CME rules requiring it to keep its customers' funds separate from the firm's assets.

Donohue said the CME is still investigating the extent of the violation. He also announced that floor brokers and traders guaranteed by MF Global or its division have been barred from CME's trading floors.

FBI spokesman Tim Flannelly said he couldn't confirm or deny an FBI investigation.

MF Global, (MF) a Wall Street brokerage firm led by former New Jersey governor and Goldman Sachs CEO Jon Corzine, filed for Chapter 11 protection on Monday.

MF Global did not return requests for comment.

MF Global's downfall has been attributed to, among other things, making bad bets on some $6.3 billion of European government debt.

When those bets went sour and its financial troubles worsened, MF Global may have tapped its clients money, according to the Wall Street Journal. It's unclear how the money may have been used.

Using clients money to help its own bottom line through risky bets would violate Commodities Futures Trading Commission rules on such trades, according to regulators and financial experts.

Financial experts say that they expect the investigation to turn up more questions in coming days. Expect congressional inquiries to follow, said Brian Gardner with investment firm Keefe, Bruyette & Woods.

"The question with MF Global is going to be: Was this fraudulent or was it sloppy paperwork and sloppy oversight?" Gardner said. "I think there are going to be lots of questions for CME and CFTC and a lot of good congressional hearings."

- CNNMoney Senior Writer Chris Isidore and CNN's Susan Candiotti and Lisa Sylvester contributed to this report. To top of page

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