MF Global sold assets to Goldman before collapse: sources
Tue, Jan 3 2012
By Lauren Tara LaCapra and Matthew Goldstein
(Reuters) - MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), one of the sources said.
The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd (MFGLQ.PK: Quote, Profile, Research, Stock Buzz) filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.
At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.
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It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity.
The Wall Street Journal previously reported that George Soros' fund was a buyer of securities sold by MF Global, scooping-up some of its European sovereign debt at a deep discount. Panic among investors and clients about MF Global's $6.3 billion bet on European sovereign bonds led to its demise.
Corzine, who was CEO of MF Global at the time of the collapse, headed Goldman Sachs from 1994 to 1999 before being ousted after a power struggle with co-CEO Henry Paulson.
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(Additional reporting by David Henry; editing by Martin Howell and Andre Grenon)
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