U.S. Commodity Futures Trading Commission REDACTED

Office of the Inspector General by CFTC

Review of the Commodity Futures Trading Commission’s 

Oversight and Regulation of MF Global, Inc.

Prepared by the 

Office of the Inspector General

Commodity Futures Trading Commission

May 16, 2013

This CFTC OIG Report is subject to the provisions of the Privacy 

Act of 1974, 5 USC § 552a, and has been redacted as determined 

by the Commodity Futures Trading Commission. The redactions are 

not determined by the CFTC OIG. All redactions are made 

pursuant to exemption (b)(6) of the Freedom of Information Act, 

5 USC § 552(b)(6). In lieu of redaction, the Commission has 

anonymized lower level titles that are traceable to the 

individual. The following denote the CFTC field offices: HQ 

(Headquarters, Washington, D.C.); CH (Central Region, Chicago, 

IL); NY (Eastern Region, New York, NY).
U.S. Commodity Futures Trading Commission REDACTED

Office of the Inspector General by CFTC

Review of the Commodity Futures Trading Commission’s 

Oversight and Regulation of MF Global, Inc.

Executive Summary

On October 31, 2011, MF Global Holdings Ltd. and MF Global Finance USA Inc. filed 

for bankruptcy protection in the Southern District of New York under Chapter 11 of the 

Bankruptcy Code. On the same day, the United States District Court for the Southern District of 

New York entered an order granting the application of the Securities Investor Protection 

Corporation (“SIPC”) for issuance of a Protective Decree adjudicating that the customers of 

MFGI were in need of protection afforded by Securities Investor Protection Act, and appointing 

a Trustee to oversee the liquidation. The Trustee eventually reported that MFGI suffered a 

shortfall in segregated property available to return to customers (“customer segregated funds”)

totaling “approximately $900 million in domestic accounts (both commodities and securities), 

plus an additional approximately $700 million related to trading by customers on foreign 

exchanges.”1

 

On November 30, 2011, Senator Richard C. Shelby, then Ranking Member on the 

Banking, Housing, and Urban Affairs Committee, requested “a report on the CFTC’s oversight 

and regulation of MF Global Inc.” He also requested that our Office examine whether CFTC 

Chairman Gary Gensler’s decision to recuse himself (or issue a statement of non-participation) is

consistent with the agency’s official recusal policy. Specifically, our report was requested to 

include: 

1. A detailed account of the CFTC’s role in overseeing and regulating MFGI, including an 

assessment of whether its oversight and regulation of MFGI differed in any material way 

from its oversight and regulation of other futures commission merchants (FCMs);

2. A detailed account of how the CFTC coordinated with the Chicago Mercantile Exchange 

(“CME”), the designated self-regulatory organization for MFGI, in overseeing MFGI’s 

customer segregated funds;

3. A summary of relevant examination manuals or other guidance for staff involved in 

overseeing and regulating MFGI or monitoring the CME’s oversight of MFGI;

4. An analysis of whether and how the CFTC’s oversight of MFGI changed after the 

CFTC’s enforcement actions against MFGI in December 2007 and December 2009;

 1 Report of Trustee’s Investigation and Recommendations (“Trustee’s Report”), page 2, filed June 4, 2012, In re MF 

Global, Inc., Case No. 11-2790 (MG) SIPA, US Bankruptcy Court, Southern District of New York. A link to the 

Trustee’s Report is available here: http://dm.epiq11.com/MFG/Project. All internet addresses cited in this report 

were last visited on May 15 or May 16, 2013.
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5. An analysis of the CFTC’s role in the determination that caused MFGI to increase its net 

capital in August 2011;

6. An analysis of the CFTC’s activities with respect to MFGI in the week prior to the 

liquidation;

7. An analysis of whether CFTC Chairman Gary Gensler’s decision to recuse himself from 

matters relating to the MFGI investigation is consistent with the CFTC’s official recusal 

policy; and

8. An analysis of whether and how a decision by CFTC Chairman Gary Gensler to recuse 

himself from previous matters relating to MFGI would have been consistent with the 

CFTC’s official recusal policy.

In order to complete our report, we interviewed or discussed specific matters of interest 

with more than 30 individuals, including current and former CFTC employees, current and 

former CFTC Commissioners, Chairman Gensler, and market professionals. Several were 

interviewed on multiple occasions. In addition, we reviewed thousands of documents furnished 

by representatives of the Trustee for MFGI, and furnished by the Commission. Documents

included email, memoranda, spreadsheets, correspondence, pleadings, drafts, and other items. 

We also reviewed recordings of closed Commission meetings at the end of October and 

beginning of November, 2011. 

Our responses to the first five questions are addressed at pages 10 through 16 of this 

report, and summarized briefly below. 

CFTC’s monitoring of MFGI differed from other FCMs in that CFTC enhanced 

surveillance of MF Global three years before the events leading to the MF Global bankruptcy. 

These enhancements consisted of daily (rather than monthly) review of MF Global’s limited 

financial information (known as the “cap, seg, and secured” statement),2 along with a limited 

review performed after 2009 that did not involve a detailed examination of MFGI’s treatment of 

customer funds. CFTC also required MF Global to undergo a review by an independent 

consulting firm in 2009, as part of a settlement following a CFTC Enforcement proceeding. 

CFTC staff charged with responsibility for monitoring MFGI reviewed those findings and was

briefed on MFGI’s compliance with the settlement provisions. 

 2 In accordance with CME’s Audit Information Bulletin #12-04, dated April 2, 2012, and NFA Financial 

Requirements Section 8, CME and NFA require FCMs to submit daily segregated, secured 30.7 and sequestered 

statements, as applicable, through WinJammerTM by 12:00 noon on the following business day. 

http://www.cmegroup.com/toolsinformation/lookups/advisories/clearing/Daily_Segregatedx_Secured_30.7_and_Sequestered_Statements.html. 

NFA has published detailed information on current daily reporting requirements here: 

http://www.nfa.futures.org/NFA-compliance/NFA-futures-commission-merchants/fcm-reporting.pdf. 

The Trustee’s Report refers to this statement as the Segregated and Secured Statement. See, e.g., Trustee’s Report at 

92 (discussing CFTC and CME’s request for cap, seg, and secured statements for October 26, 2011). We use “cap, 

seg, and secured” because it was the term used by CFTC staff during our interviews. 
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CFTC staff did not formally coordinate with CME concerning oversight of MFGI. Staff 

told us that they would communicate with CME occasionally pertaining to MFGI, essentially to 

address specific issues as deemed necessary, but nothing formal was in place to coordinate 

regulatory efforts with regard to MFGI (or any other FCM). CFTC staff encountered CME staff 

at MFGI offices during the final week of MFGI’s existence, but these encounters were not 

coordinated. Instead, CFTC separately determined to go to MFGI’s offices to obtain information 

and assurances, and found CME staff arriving on site within a short period. CME and CFTC 

communicated during the final week of MFGI’s existence on a consistent basis. 

 

CFTC had no examination manuals or other guidance for staff involved in overseeing and 

regulating MFGI or any other FCM, or for monitoring CME’s oversight of MFGI or any other 

FCM. Instead, prior to MFGI’s collapse, CFTC relied on materials provided by the Joint Audit 

Committee,

3 its own guides for registrants regarding FCM statements, and CFTC published 

interpretations. CFTC staff had detailed guidance for FCM examinations in its early years; we 

do not know when the detailed guidance was abandoned. Since the collapse of MFGI, CFTC has 

created a guide to reviewing the monthly financial statements it receives for all FCMs under its 

oversight, which CFTC staff state describes what they were already doing with regard to 

financial statement reviews. 

The CFTC Division of Enforcement (“Enforcement”) charged MFGI in two Enforcement 

proceedings in the four years leading to the eventual SIPC filing; however, neither Enforcement 

proceeding involved misconduct pertaining to treatment of customer segregated funds. CFTC 

did not alter its oversight of MFGI after the first Enforcement proceeding in 2007, but it did 

enhance its oversight of MFGI following the second CFTC Enforcement proceeding in 2009. 

The 2009 Enforcement proceeding arose from a rogue trader event that took place in February 

2008; unauthorized trading resulted in overnight losses to MFGI in excess of $141 million, 

which immediately impacted MFGI’s net capital.4

 Daily review of MFGI’s financial 

information would permit CFTC staff to know quickly if a similar large overnight decrease in 

firm capital took place in the future, indicating a similar rogue trader situation, and CFTC staff 

required MFGI to submit their financial information to CFTC on a daily basis. CFTC staff 

charged with day-to-day oversight responsibilities for MFGI also remained informed on MFGI’s 

compliance with undertakings that were part of the 2009 settlement agreement, which pertained 

to branch office training of managers and establishment of supervisory controls pertaining to the 

monitoring and supervision of traders. 

 3 The Joint Audit Committee is a representative committee of US futures exchanges and regulatory organizations. 

Information about the Committee (including documents) is available here: http://www.wjammer.com/jac/. 

4 On December 12, 2012, the trader admitted guilt in a federal criminal proceeding, and faced a maximum prison 

sentence of 10 years and a $1 million fine; the trader was sentenced to five years in prison. Former MF Global 

Trader Pleads Guilty in $141 mln Trading Loss, Ann Saphir, Thomson Reuters News & Insight, December 11, 

2012. http://newsandinsight.thomsonreuters.com/Legal/News/2012/12_-

_December/Former_MF_Global_trader_pleads_guilty_in_$141_mln_trading_loss/; Ex-MF Global Broker 

Sentenced to 5 Years for Rogue Trades, Andrew Harris, Bloomberg, April 17, 2013. 

http://www.bloomberg.com/news/2013-04-16/ex-mf-global-broker-sentenced-to-5-years-for-trades-correct-.html. 
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iv

We note that MFGI was also subject to numerous exchange disciplinary actions between 

2007 and MFGI’s collapse.5

 

CFTC had no official role in the determination that caused MFGI to increase its net 

capital in August 2011. Staff charged with responsibility for day-to-day oversight of MFGI were 

aware of the situation at the time, and were in communication with FINRA and CME. 

The final three questions posed by Senator Shelby are addressed at pages 17 through 57

of this report; our response is summarized below. 

In the week prior to the SIPC filing, CFTC staff charged with responsibility for day-today oversight were on site at MFGI in Chicago and New York on Thursday and Friday. On 

Thursday, CFTC staff were briefed on MFGI’s financial status; CFTC staff asked for supporting 

documentation for the cap, seg, and secured statement for that day (which would reveal status as 

of close of business on Wednesday October 26), but they left without the documentation. Staff 

returned on Friday and received the documents on disc. CFTC staff did not go to MFGI on 

Saturday, but did remain in contact with FINRA, CME, and other regulators. By the end of the 

day, Saturday, it was clear that the parent companies would likely be placed in bankruptcy, and it 

was hoped (but by no means a sure thing) that MFGI could be sold, intact, with an 

uncomplicated transfer of customer funds to a new owner. The Chairman became an active 

participant on Saturday, speaking directly not only with regulators but also with an outside 

attorney for MFGI, asking that MFGI comply with document requests made by staff, and that 

staff be updated on bankruptcy contingency plans. This level of participation was not unusual 

for the Chairman; when necessary or requested by staff, the Chairman has directly called 

registrants and other related professionals in connection with official business. 

CFTC staff deployed to MFGI offices in Chicago and New York on Sunday. Staff 

demanded customer fund status as of close of business Friday and were put off by MFGI until 

approximately 5 pm CST.6

 At 5 pm CST, MFGI staff let CFTC know that initial calculations of 

segregated customer funds showed a $900 million shortfall, but claimed that it was an error 

caused by the amount and type of entries at the end of the week, and promised the deficit would 

be cured once the error was found. CFTC staff in Washington worked on technical matters 

necessary to facilitate the anticipated sale of MFGI (to Interactive Brokers) and the transfer of 

customer funds. 

 5 Hearing entitled “The Collapse of MF Global,” Dec 15, 2011, House of Representatives Committee on Financial 

Services, Subcommittee on Oversight and Investigations, CME Group Response (“CME timeline”) at pages 7-8 of 

the .pdf. http://financialservices.house.gov/uploadedfiles/cme_group_response.pdf. We did not audit or verify the 

factual assertions contained in the CME timeline; where witness statements appear inconsistent with the CME 

timeline, we have so noted in this report. 

6 Central Standard Time. All times represent our best estimate based on our ability to reconstruct the events using 

the available documents that have been reviewed, and also on individuals’ best recollections. 
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v

At 2:30 am EST,7 MFGI admitted the segregated funds deficiency was not an error, but 

was real. The sale fell through, as Interactive Brokers withdrew from negotiations. By 5:30 am 

it was decided that MFGI would be subject to a SIPC filing. At noon, the Commission held a 

closed emergency meeting led by Chairman Gensler. Chairman Gensler described the events of 

the prior week and weekend, and with staff briefed the Commissioners on the procedures to be 

followed in the SIPC proceeding. Before the meeting ended, the Commissioners voted an Order 

of Investigation of MFGI to the Division of Enforcement; the Chairman made the motion and 

voted “aye.” 

The Chairman exclusively used his personal email account over the weekend while 

dealing with MFGI matters from his home. In fact, it appears he used his personal email 

consistently from his arrival at CFTC in 2009 until the collapse of MFGI. He used his personal 

email so much that he carried two smartphones, one issued by CFTC with his work email, and 

another for his personal email. He used his personal email to schedule meetings and for 

substantive conversations; he used it to contact CFTC staff at their official CFTC email 

addresses as well as their personal email accounts; he used it because he did not know how to 

access his official email at home. In reviewing hundreds of email messages using the 

Chairman’s personal email address, we found nothing that appeared corrupt, and he has since 

ceased this practice. Nevertheless, our examination of the Chairman’s email was limited to 

email pertaining to MFGI. 

On November 2, the Commission participated in a hearing in the SIPC proceeding to 

permit the first bulk transfer of customer accounts; the Chairman participated and was fully 

briefed following the hearing. The Commission held a second closed meeting to discuss MFGI; 

the Chairman led the meeting, and he did not discuss the possibility of recusal nor did he express 

any concern for appearances caused by his continued participation. 

On November 3, the Chairman sought the advice of the General Counsel and Designated 

Agency Ethics Officer, asking whether he should recuse himself at this point. The Commission 

does not have an official recusal policy, but the General Counsel and Designated Agency Ethics 

Officer does give advice on recusals when requested and follows Office of Government Ethics

(OGE) regulations and policy in giving advice. The General Counsel and Designated Agency 

Ethics Officer instructed that there was no need to recuse given the fact that there was neither a 

financial conflict nor an appearance problem under OGE regulations. The Chairman 

nevertheless decided to recuse himself; the General Counsel and Designated Agency Ethics 

Officer advised it would be more consistent with OGE regulatory language to state that he would 

no longer participate. The Chairman decided not to participate in matters involving MFGI. 

On November 8, the Chairman signed a Statement of Non-Participation. On the same 

day, the Commission received a memo and sign-off to appoint Commissioner Sommers to 

oversee matters involving MFGI; the appointment was completed on November 9. 

 7 Eastern Standard Time. Central Standard Time is one hour behind Eastern Standard Time. On October 31, 2011, 

both time zones were on Daylight Saving Time. 
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vi

On December 13, the General Counsel and Designated Agency Ethics Official issued a 

memorandum describing the Chairman’s involvement in matters leading up to the collapse of 

MFGI in detail, and concluded that the Chairman’s initial involvement was consistent with OGE 

standards and was not improper. 

The Chairman’s level of involvement in MFGI was not inconsistent with CFTC’s 

interpretation of OGE recusal policy leading up to the collapse of MFGI; his decision to issue a 

non-participation statement ran counter to specific advice on the matter offered by the General 

Counsel and Designated Agency Ethics Official. 
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Review of the Commodity Futures Trading Commission’s 

Oversight and Regulation of MF Global, Inc.

Table of Contents

Executive Summary......................................................................................................................... i

Table of Contents.......................................................................................................................... vii

Significant Individuals................................................................................................................... ix

CFTC ...................................................................................................................................... ix

MF Global................................................................................................................................ x

Introduction..................................................................................................................................... 1

Background.............................................................................................................................. 1

Protection of Customer Funds ............................................................................................ 1

MFGI Timeline ................................................................................................................... 2

Senator Shelby’s Request ........................................................................................................ 8

Methodology............................................................................................................................ 9

Analysis of the Eight Topics Posed by Senator Shelby................................................................ 10

CFTC’s Role in Overseeing and Regulating MFGI .............................................................. 10

CFTC’s Coordination with the Chicago Mercantile Exchange Regarding 

Monitoring of MFGI’s Customer Segregated Funds............................................................. 12

Examination Manuals and Guidance for Overseeing and Regulating MFGI........................ 13

CFTC’s Oversight of MFGI after the CFTC’s Enforcement Actions in 2007 

and 2009................................................................................................................................. 14

The 2007 Enforcement Action.......................................................................................... 14

The 2009 Enforcement Action.......................................................................................... 15

CFTC’s Role in the Determination that Caused MFGI to Increase its Net 

Capital in August 2011 .......................................................................................................... 16
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viii

CFTC’s Activities with Respect to MFGI in the Week Prior to the 

Liquidation............................................................................................................................. 17

Monday, October 24 – Wednesday, October 26............................................................... 17

Thursday, October 27........................................................................................................ 19

Friday, October 28 ............................................................................................................ 22

Saturday, October 29 ........................................................................................................ 27

Sunday, October 30........................................................................................................... 28

Monday, October 31 ......................................................................................................... 35

Tuesday, November 1 – Thursday, November 3 .............................................................. 41

Friday, November 4 – Friday, November 11.................................................................... 43

The Chairman’s Use of Personal Email to Accomplish Official CFTC 

Business................................................................................................................................. 44

The Chairman’s Recusal....................................................................................................... 46

An Analysis of Whether CFTC Chairman Gary Gensler’s Decision to 

Recuse Himself from Matters Relating to the MFGI Investigation is 

Consistent with the CFTC’s Official Recusal Policy ....................................................... 46

An Analysis of Whether and How a Decision by CFTC Chairman Gary 

Gensler to Recuse Himself from Previous Matters Relating to MFGI 

Would Have Been Consistent with the CFTC’s Official Recusal Policy......................... 57

Conclusion .................................................................................................................................... 58
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Significant Individuals 

CFTC

Chairman, CFTC Gary Gensler

Director, Division of Swap Dealer and 

Intermediary Oversight (DSIO)

Gary Barnett

Director, Division of Clearing and Risk (DCR) Ananda Radhakrishnan

[HQ DSIO Senior Supervisory 

Auditor]

[HQ DSIO Supervisory Auditor]

[CH DSIO Audit Team Leader 

Supervisor]

[CH DSIO Audit Team Leader]

[CH DSIO Staff Auditors 1 – 3] , , and 

[NY DSIO Audit Team Leader 

Supervisor]

[NY DSIO Audit Team Leader 1]

[NY DSIO Audit Team Leader 2]

[HQ DCR Senior Supervisory 

Attorney]

General Counsel, Office of General Counsel 

(Office of General Counsel or OGC)

Dan Berkovitz

OGC Attorney charged with bankruptcy 

responsibilities

[NY Enforcement Senior Supervisory 

Attorney]

[NY Enforcement Staff Attorney]

[CH Enforcement Supervisory 

Attorney 1]

[CH Enforcement Supervisory 

Attorney 2]

Chicago Enforcement Investigator
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x 

Significant Individuals

(continued) 

MF Global8

MF Global Holdings, Ltd. MFGI

Chairman and Chief Executive 

Officer

CEO and Board Member Jon Corzine

President and Chief Operating 

Officer

Board Member Bradley Abelow

General Counsel General Counsel and Board 

Member

Laurie Ferber

Chief Financial Officer, Chief 

Accounting Officer, and 

Global Controller9

Henri Steenkamp

Chief Risk Officer Michael Stockman

North American CFO Christine Serwinski

Global Treasurer Vinay Mahajan

Assistant Treasurer Edith O’Brien

[MFGI Accountant 1]

[MFGI Attorney 1]

[MFGI Attorney 2]

 8 Trustee’s Report at 17-21. 

9 MFGI’s Global Treasurer reported directly to Mr. Steenkamp. Trustee’s report at 20. 
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Review of the Commodity Futures Trading Commission’s 

Oversight and Regulation of MF Global, Inc.

Introduction

Background 

Protection of Customer Funds

All FCMs are required by statute to “treat and deal with all money, securities, and 

property received by such person to margin, guarantee, or secure the trades or contracts of any 

customer of such person, or accruing to such customer as the result of such trades or contracts, as 

belonging to such customer.”10 The law further requires that customer “money, securities, and 

property shall be separately accounted for and shall not be commingled with the funds of such 

commission merchant....” 11 An FCM is prohibited under Commission regulations from 

drawing upon customer segregated funds beyond its actual interest therein.12 In addition, 

Commission regulations require that “[e]ach [FCM] ... must, at the close of each business day, 

hold in segregated accounts on behalf of commodity or option customers [s]ufficient United 

States dollars held, in the United States, to meet all United States dollar obligations ...”13 The 

Commission has opined:

Section 4d was designed for the broad purpose of protecting customers from 

having their money, securities or property appropriated by a futures commission 

merchant, or some other depository, without adequate legal basis, and the more 

specific purpose of ensuring the integrity of the futures market by preventing the 

use of customer funds to finance market transactions by a futures commission 

merchant for its own account or for other customers.14

It has been remarked that customer segregated accounts are the “third rail” of the futures 

industry.15 

Part 30 of the CFTC’s regulations (17 C.F.R. Part 30) governs the treatment and 

protection of customer funds deposited by customers for foreign futures and options transactions. 

In October 2011, customer fund protections for foreign futures and options customers differed 

 10 Section 4d(a)(2) of the Act, 7 U.S.C. § 6d(a).

11 Id.

12 Regulation 1.23, 17 C.F.R. § 1.23.

13 Regulation 1.49, 17 C.F.R. § 1.49.

14 Dorn v. Shearson Hayden Stone, Inc., Commodity Futures Trading Commission, 1981 CFTC LEXIS 169, Comm. 

Fut. L. Rep. (CCH) P21,253 [’80-’82 Transfer Binder, Oct. 6, 1981]. 

15 CFTC Public Roundtable to Discuss Additional Customer Collateral Protections, February 29, 2012 (PM 

session), page 60 (statement by Michael Greenberger, Law Professor, UMd School of Law); available here: 

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/transcript022912pm.pdf.
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2

significantly from domestic futures customers, resulting in lesser protections. These differences 

are discussed in the course of this review. 16

MFGI Timeline

The final days of MFGI have been recounted in detail in the Trustee’s Report and in a 

report issued by staff for the House Committee on Financial Services, Subcommittee on 

Oversight & Investigations (“House Staff Report”).

17 Familiarity with both reports is presumed, 

and we will cite to the reports for various background facts and references throughout this 

review. Nevertheless, we give a brief outline of the essential facts: 

1783 James Man started a sugar brokerage business.

1869 James Man’s sugar brokerage became known as E.D.& F. Man.

1972 E.D. & F. Man began trading commodity futures.

1983 E.D. & F. Man expanded to include investment management.

1994 E.D. & F. Man was first listed on the London Stock Exchange.

2000 E.D. & F. Man created Man Group plc (which thereafter acquired 17 additional

companies).

2007 Man Group formed MF Global, Inc. (MFGI) a Bermuda company.

2007 

(July)

MFGI announced an initial public offering of MFGI under the ticker symbol 

“MF.” It was the second largest NYSE IPO of 2007.

18

 16 See fn. 89 and accompanying text. MFGI was also a broker-dealer. Broker-dealer regulatory requirements and 

related customer protection rules are discussed in detail in the Trustee’s Report at 26-30. 

17 Staff Report Prepared for Rep. Randy Neugebauer, Chairman, Subcommittee on Oversight & Investigations, 

Committee on Financial Services, 112th Congress, November 15, 2012 (available here: 

http://financialservices.house.gov/uploadedfiles/256882456288524.pdf). The House Staff Report, a public 

document, includes mention or discussion of the following CFTC employees: Chairman Gensler; Dan Berkovitz, 

General Counsel; Gary Barnett, Director, DSIO; Ananda Radhakrishnan, Director, DCR; [HQ DSIO Senior 

Supervisory Auditor]; [HQ DSIO Supervisory Auditor]; [CH DSIO Audit Team Leader 

Supervisor]; [HQ DCR Senior Supervisory Attorney]. It includes mention or discussion of the 

following MFGI Officers or employees: Jon Corzine, Bradley Abelow, Laurie Ferber, Henri Steenkamp, Michael 

Stockman, Christine Serwinski, Vinay Mahajan, Edith O’Brien, [MFGI Accountant 1], and [MFGI Attorney 

2]. 

18 Timeline information up to 2007 is gleaned from the House Staff Report, pages 5-6. 
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3

2007 

(December)

CFTC simultaneously filed and settled an administrative action against MFGI 

and Thomas Gilmartin. CFTC charged violations of section 4g of the 

Commodity Exchange Act, 7 U.S.C. § 6g, and Commission Regulations 

1.35(a-1)(1) and 166.3, 17 C.F.R. §§ 1.35(a-1)(1) and 166.3. MFGI and 

Gilmartin paid civil monetary penalties of $2 million and $250,000, 

respectively, and paid an additional $76 million to a receiver.

19

2007 MFGI was fined for exchange rule infractions (some involving multiple rule 

violations) on 13 separate occasions in 2007. Fine amounts for each instance 

ranged from $1,000 to $75,000. The average fine was $11,292; fines totaled 

$135,000 for 2007. Six fines were based on rule violations charged in 2006; 

one fine was based on rule violations charged in 2005. 20

2008 

(February)

MFGI suffered losses of $141.5 million loss in wheat futures due to the 

actions of one rogue trader. 21 MFGI share prices fell 28%, and the firm 

subsequently became leveraged at almost 39-to-1.

2008 (June) MFGI’s stock fell more than 43% following a negative announcement.

2008 (July) MFGI announced the appointment of David Schamis to its board (nominated 

by Christopher Flowers). MFGI stock continued to fall.

2008 

(October)

MFGI announced the appointment of Bernard W. Dan as CEO. MFGI’s 

stock rallied 80% within a week. 

2008 

(December)

MFGI began inquiries with the NY Fed to obtain designation as a “primary 

dealer”22 

 19 MF Global Inc. and Thomas Gilmartin to Pay More Than $77 Million to Settle Actions by CFTC and Receiver ad 

litem, CFTC press release, available here: http://www.cftc.gov/PressRoom/PressReleases/pr5427-07. 

20 CME timeline, supra fn. 5, at page 7 of the .pdf. The CME timeline, a public document, names the following 

CFTC Officers and employees: Chairman Gensler; Ananda Radhakrishnan, Director, DCR; [HQ DSIO 

Supervisory Auditor]; [CH DSIO Audit Team Leader Supervisor]; [CH DSIO Audit Team 

Leader]; [CH DSIO Staff Auditor 2]; [NY DSIO Audit Team Leader 2]. It names or discusses the 

following MFGI Officers and employees: Jon Corzine, Laurie Ferber, Henri Steenkamp, Michael Stockman, 

Christine Serwinski, Edith O’Brien, [MFGI Attorney 2]. 

21 CFTC Statement on MF Global Wheat Futures Trading, CFTC press report, available here: 

http://www.cftc.gov/PressRoom/PressReleases/pr5462-08. 

22 The events of 2008 listed here are described in detail in the House Report at page 9-11. NY Fed information 

regarding primary dealers may be found here: http://www.newyorkfed.org/markets/pridealers_policies.html.
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4

2008 

(December )

The Chicago Board of Trade (CBOT) fined MFGI $400,000 for failing to 

supervise employees and certain trade practice violations, including preexecution communications.

23 

2008 MFGI was fined for exchange rule infractions on nine occasions in 2008. 

Fine amounts ranged from $1,500 to $400,000 (the $400k fine is described 

above). The average fine was $49,167; fines totaled $442,500 for 2008. 

Five penalties were based on rule violations charged in 2007.24

2009 

(December)

CFTC simultaneously filed and settled an administrative action against MFGI 

stemming from the Dooley trading incident. The CFTC charged MFGI with 

violations of supervision requirements under Commission Regulation 166.3, 

17 C.F.R. § 166.3. MFGI paid a civil monetary penalty of $10 million.25 

2009 

(December)

CBOT fined MFGI $495,000 for violations of CBOT rules in connection with 

the Dooley trading incident (taking into account the CFTC enforcement 

action).

26

2009 MFGI was fined for exchange rule infractions on five occasions in 2009. 

Fine amounts ranged from $2,500 to $495,000 (the $495k fine is described 

above). The average fine was $78,214 and the total amount of fines imposed 

was $547,500. One fine was for misconduct charged 2008.27 

2010 

(January)

NY Fed revised its standards to prohibit primary dealer status to applicants 

that have been subject to (among other things) regulatory action or 

investigation within the last year.

28 

2010 

(January)

MFGI reincorporated in Delaware, in order to obtain primary dealer status 

with NY Fed.

 23 CME Timeline, supra fn. 5, at page 3-4 of the .pdf. 

24 CME Timeline, supra fn. 5, at page 7-8 of the .pdf. 

25 CFTC Sanctions MF Global Inc. $10 Million for Significant Supervision Violations between 2003 and 2008, 

CFTC press release, Dec. 17, 2009, available here: http://www.cftc.gov/PressRoom/PressReleases/pr5763-09. The 

order is available here: 

http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfmfglobalorder1217200

9.pdf. 

26 CME Timeline, supra fn. 5, at page 5-6 of the .pdf. 

27 CME Timeline, supra fn. 5 at page 8 of the .pdf. 

28 New York Fed Publishes Revised Policy for Administration of Primary Dealer Relationships, NY Fed press 

release, January 11, 2010, available here: 

http://www.newyorkfed.org/newsevents/news/markets/2010/ma100111.html; Operating Policy: Administration of 

Relationships with Primary Dealers, January 11, 2010, available here: 

http://www.newyorkfed.org/markets/pridealers_policies.html. 
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2010 

(March 17)

Bernard Dan resigned as CEO of MF Global.

2010 

(March 23)

Jon S. Corzine was appointed as chairman and CEO of MF Global Holdings, 

Ltd. 

2010 CME reported no fines for MFGI during 2010. 

2011 

(February)

NY Fed bestowed primary dealer status on MFGI.29

2011 

(March)

CME reported MFGI was fined $5,000 each for two rule infractions occurring 

on March 17, 2010.30 

August 

2011

CME reported the results of an audit as of January 31, 2011, which did not 

find any material problems with MFGI’s calculations of net capital, segregated 

amounts, or secured amounts.31

October 24, 

2011

Moody’s32 downgrades MFGI and MF Global Holdings, Ltd. due to (among 

other things) reports of excessive proprietary investment in European 

Sovereign debt and resulting FINRA action requiring MFGI to increase 

haircuts on these investments for net capital calculation purposes.33

October 25, 

2011

MFGI announced its largest-ever quarterly loss, reporting a net deficit of 

$191.6 million.

34 

October 26, 

2011

S&P put MFGI on “Credit Watch Negative.” Commissioners were briefed on 

MFGI status.35 

October 27, 

2011

Moody’s cut MFGI to junk status;

36 CFTC was on site at MFGI offices in 

New York and Chicago, and began a review of MFGI’s customer fund 

documentation as of close of business, October 26. 

 29 Memorandum to all Primary Dealers and Recipients of the Weekly Press Release on Dealer Positions and 

Transactions, Nov. 2, 2010, available here: 

http://www.newyorkfed.org/newsevents/news/markets/2011/an110202p.html. 

30 CME Timeline, supra fn. 5 at page 8 of the .pdf. 

31 Trustee’s Report at page 46.

32 Moody’s Investors Services (Moody’s) provides credit ratings and research covering debt instruments and 

securities. Its parent company is Moody’s Corporation. http://www.moodys.com/Pages/atc.aspx. 

33 Ratings Action: Moody’s Downgrades MF Global to Baa3; reviews for further downgrade, Moody’s 

announcement available here: http://www.moodys.com/research/Moodys-downgrades-MF-Global-to-Baa3-

reviews-for-further-downgrade--PR_229068. 

34 Trustee’s Report at page 91. 

35 House Report at page 88. 

36 Moody’s notice is available here: http://www.moodys.com/research/Moodys-downgrades-MF-Global-to-Ba2-

reviews-for-further-downgrade--PR_229534. 
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6

October 28, 

2011

CFTC was on site at MFGI offices in New York and Chicago; staff continued

to request documents to support customer fund balances as of close of 

business, October 26, and was satisfied with document production by close of 

business Friday. Commissioners were briefed on MFGI in a regularly 

scheduled closed Commission meeting to discuss surveillance and 

enforcement matters. 

October 29, 

2011

CFTC learned that the NY Fed planned to terminate MFGI’s primary dealer 

status. CFTC was not on site at MFGI; staff was in communication with 

regulators and each other; the Chairman was personally involved in 

substantive outside communications involving MFGI; he requested

documents and other information regarding MFGI’s plans.

October 30, 

2011

 Early afternoon -- CFTC staffers were on site at MFGI in New York and 

Chicago; CFTC attorneys with responsibility for bankruptcy-related 

matters were on site at CFTC in Washington; CFTC Enforcement was on 

site at CFTC in New York. Through the afternoon CFTC requested

financial information.

 CFTC staff performed administrative document drafting pertinent to the 

anticipated sale and also to the possible SIPC filing; staff was in frequent 

contact with each other, other regulators, and MFGI. 

 5-6 pm (EST) -- CFTC staff learned that MFGI had identified a deficit in 

customer segregated funds totaling approximately $900 million which 

both MFGI and CFTC treated as an error.

 8 pm (EST) -- The Chairman updated the Commissioners and sought their 

assistance with no-action relief necessary to expedite account transfers that 

would accompany the anticipated sale. The Chairman continued to be 

personally involved in substantive outside communications pertaining to 

MFGI, including requests for cooperation with staff document requests. 

October 31, 

2011

 2 – 5:30 am (EST) -- CFTC learned that customer segregated funds are 

officially missing, the deal had fallen through, and a SIPC proceeding 

would be filed. The Chairman was personally involved in outside 

conversations pertaining to MFGI during this time. 

 6 am (EST) -- The two Washington CFTC attorneys charged with 

bankruptcy duties headed for New York. 

 8 – 9 am (EST) -- CFTC staff returned to the MFGI Offices in New York 

and Chicago. They were later joined by Enforcement staff.

 Noon (EST) -- The Commission was updated in a closed emergency 

meeting; the Commission authorized an Enforcement investigation into 

MFGI; the Chairman led the meeting and voted in favor of the 

Enforcement investigation. 

 MF Global Holdings, Ltd., and MF Global Finance USA Inc. filed for 

bankruptcy protection under Chapter 11 of the Bankruptcy Code and a 

SIPC proceeding was filed for MFGI, all in the Southern District of New 

York. 
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 The CFTC attorneys charged with bankruptcy-related duties were not 

informed of the filing; they got a tip from CFTC staff on site at MFGI in 

New York, and intercepted the Trustee’s lawyers at the courthouse; they

made changes to the pleadings believed necessary to protect the interests 

of CFTC and futures customers; the SIPC proceeding was filed with these 

changes in original handwriting by a CFTC attorney. 

November 

2, 2011

CFTC filed a statement in support of the first requested bulk transfer of 

MFGI customer accounts and related margin. The Commission approved 

this filing with the Chairman participating. The Chairman held a second 

closed emergency meeting; the Chairman led this meeting and did not 

announce or indicate he felt uncomfortable continuing to participate in 

MFGI matters. 

November 

3,

2011

The Chairman determined to cease participation in all matters involving 

MFGI.

November 

4, 2011

The Commission held a regularly scheduled closed meeting to discuss 

surveillance and enforcement matters. Commissioner Chilton conducted 

the meeting; Commissioner Chilton did not state that the Chairman would

no longer participate in matters involving MFGI; the Chairman did not 

join this meeting. MFGI was discussed. 

November 

8, 2011

The Chairman issued a Statement of Non-Participation

November 

9, 2011

The Commission approved the appointment of Commissioner Sommers to 

oversee matters involving MFGI. 

November 

15, 2011

The General Counsel and Designated Agency Ethics Official issued a 

memorandum concluding that the Chairman did not violate any ethics 

provisions in connection with his participation in matters pertaining to 

MFGI prior to November 3, or in waiting to request ethics advice on that 

date. 
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Senator Shelby’s Request 

On November 30, 2011, Senator Shelby asked our Office to review the CFTC’s oversight 

and regulation of MF Global.37 The Senator asked our report to include the following:

1) A detailed account of the CFTC’s role in overseeing and regulating MFGI, including 

an assessment of whether its oversight and regulation of MFGI differed in any 

material way from its oversight and regulation of other futures commission 

merchants;

2) A detailed account of how the CFTC coordinated with the Chicago Mercantile 

Exchange (“CME”), the designated self-regulatory organization for MFGI, in 

overseeing MFGI’s customer segregated funds;

3) A summary of relevant examination manuals or other guidance for staff involved in 

overseeing and regulating MFGI or monitoring the CME’s oversight of MFGI;

4) An analysis of whether and how the CFTC’s oversight of MFGI changed after the 

CFTC’s enforcement actions against MFGI in December 2007 and December 2009;

5) An analysis of the CFTC’s role in the determination that caused MFGI to increase its 

net capital in August 2011;

6) An analysis of the CFTC’s activities with respect to MFGI in the week prior to the 

liquidation;

7) An analysis of whether CFTC Chairman Gary Gensler’s decision to recuse himself 

from matters relating to the MFGI investigation is consistent with the CFTC’s official 

recusal policy; and

8) An analysis of whether and how a decision by CFTC Chairman Gary Gensler to 

recuse himself from previous matters relating to MFGI would have been consistent 

with the CFTC’s official recusal policy.

Senator Shelby requested that we begin our review “once the immediate concerns about 

customers’ access to their funds are addressed,” and that we take all necessary steps to preserve 

all relevant documents and to ensure that a thorough review could be conducted. 

 37 The full text of Senator Shelby’s letter may be found here: 

http://shelby.senate.gov/public/index.cfm/newsreleases?ContentRecord_id=8355755F-2D3B-40F0-9CE9-

27CDFCDED885. 
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Methodology

In order to complete our review, we first consulted with staff in the Office of General 

Counsel charged with document retention and preservation in the MFGI matter. We obtained

access to a database compiled and updated on an ongoing basis containing email, 

correspondence, memoranda, drafts, pleadings, and other documents, all pertaining to MFGI and 

all gleaned from CFTC systems and compiled in one searchable database in order to facilitate the 

Enforcement investigation, FOIA requests, and Congressional requests. This database contained 

over 350,000 items at the end of February 2013 (including duplicates). 

Next, we contacted the Trustee to ascertain the status of the Trustee’s efforts to address 

concerns about customers’ access to their funds, and to ask for access to all documents in the 

Trustee’s possession that could be disclosed to our Office consistent with applicable law. 

Through the Agency and the Trustee we received and were given access to hundreds of 

thousands of documents. We accessed unredacted versions of all documents supplied by the 

Agency and the Trustee. We conducted targeted searches of the documents. For the Trustee 

production we reviewed every document with the phrase “CFTC.” In the Agency database, we 

conducted numerous searches by employee names, dates, and by specific keywords. We 

searched separately for the Chairman’s various email addresses. Document review was ongoing 

throughout 2012. 

We also consulted with the Division of Enforcement at the outset, and occasionally 

during our field work, with a view to avoiding disruption or interference with ongoing 

investigative efforts involving potential wrongdoing by MFGI, its former Officers and 

employees, and others. We did not interview MFGI or CME employees; Enforcement did not 

share its files with us; we have not reviewed or evaluated their investigation. Enforcement had 

interviewed and taken statements from most of the CFTC employees identified by our Office as 

involved with the CFTC’s regulation and oversight of MFG, and they did this before Senator 

Shelby issued his request to our Office. We did not obtain Enforcement’s notes of these 

interviews; however, Enforcement was helpful regarding the location and identities of CFTC 

employees to be interviewed, and was helpful discussing background information that did inform 

our interview efforts. 

Interviews took place from April 2012 through December 2012. We interviewed over 30 

people, including current and former Commission employees and Commissioners, and market 

professionals who reached out to us. We actively sought out current CFTC employees who 

either had regular duties involving MFGI or who were in contact with MFGI during its final 

days. We did not seek out former employees or market professionals; however, to the extent 

they reached out to us we did listen to what they had to say. 
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Analysis of the Eight Topics Posed by Senator Shelby

CFTC’s Role in Overseeing and Regulating MFGI

FCM oversight is the responsibility of three Examinations Branch offices headed by three 

[DSIO Audit Team Leader Supervisors], one each in Chicago, New York, and Kansas 

City.38 As of September 30, 2011, NFA reported 123 registered FCMs.39 In October 2012, the 

Kansas City Examinations Branch, with a staff of seven comprising two examination teams, had

oversight responsibility for 13 FCMs. Each examination team was charged with day to day 

oversight of six or seven FCMs. The Chicago branch, with a staff of 17, had four teams tasked 

with oversight over 36 FCMs; each team was responsible for daily oversight of nine Futures 

Commission Merchants. The New York branch, with a staff of 21, had four teams tasked with 

oversight of 67 FCMs. In October 2011, the Examinations Branch was under the Capital, 

Margin and Segregation Branch headed by [HQ DSIO Senior Supervisory Auditor], 

which in turn was within the Division of Swap Dealer and Intermediary Oversight (DSIO), with 

Gary Barnett serving as Director. The [HQ DSIO Senior Supervisory Auditor] and Mr. 

Barnett worked out of the CFTC headquarters office. 

This Examinations Branch structure was relatively new. On August 9, 2011, the CFTC 

established the new DSIO and the new Division of Clearing and Risk (DCR), and terminated the 

old Division of Clearing and Intermediary Oversight (DCIO).40 Prior to August 9, 2011, the 

Examinations Branch was called the Audit and Financial Review Branch, and it was under the 

Audit and Financial Review Section, albeit with the same [HQ DSIO Senior Supervisory 

Auditor]. 

The August restructure was not a major upheaval for the Examination Branch employees 

because everyone up through the Deputy kept their same duties; the only change was overall 

supervision switched from Mr. Radhakrishnan in DCIO to Mr. Barnett in DSIO.

41 Gary Barnett 

started with the Commission on August 28, 2011. 

 38 The Kansas City [DSIO Audit Team Leader] is also the [Senior Supervisor] in Kansas City. The New 

York and Kansas City [Audit Team Leader Supervisors] are Certified Public Accountants. The [CH DSIO 

Audit Team Leader Supervisor] has an MBA (Finance). 

39 CFTC publication President’s Budget and Performance Plan, Fiscal Year 2013 (CFTC FY 2013 Budget 

Publication), at page 155 (http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/cftcbudget2013.pdf, 

at page 164 of the .pdf). 

40 Internal CFTC memo addressed to all CFTC and dated Friday, May 13, 2011. We found no press release 

announcing the restructure. During our fieldwork, upon inquiry we learned that the appropriate Federal Register 

notices were under construction and would be forthcoming. On April 13, 2013, the Commission issued a final rule 

“amending its regulations to reflect the reassignment of responsibilities, including delegations of authority, resulting 

from its recent reorganization of Commission staff.” 78 FR 22418 (Apr. 16, 2013) (available here: 

http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08353.pdf). We note the Commission also amended 

discrete delegations in piecemeal fashion prior to this date. See, 77 FR 67866 (Nov. 14, 2012) (available here: 

http://www.gpo.gov/fdsys/pkg/FR-2012-11-14/pdf/2012-26435.pdf); 76 FR 69334 (Nov. 8, 2011) (available here: 

http://www.gpo.gov/fdsys/pkg/FR-2011-11-08/pdf/2011-27536.pdf). 

41 In addition, the New York, Chicago, and Kansas City [Audit Team Leader Supervisors] were re-titled 

as [ ].” We retained the old moniker [Audit Team Leader Supervisors] for this report in order to avoid 
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Based on interviews with employees and our review of email among employees in the 

Examinations Branch, the restructure did not create any substantive difficulties during the last 

week of MF Global. Mr. Radhakrishnan and Mr. Barnett were in constant communication and 

were both involved with CFTC’s activities during the last days of MF Global, with Mr. 

Radhakrishnan having greater involvement.42 

The Examination Branch teams review the monthly financial statements and all required 

filings for each of the FCMs, noting significant changes in FCM financial health and taking 

action as appropriate. On a day-to-day basis, the team members also deal with filing issues. 

Issues arising within financial statements and other required reports may trigger a limited review 

by the team. 

Chairman Gensler summarized the process in testimony before Congress: “the CFTC ... 

does limited-scope reviews of FCMs in a ‘for cause’ situation that are sometimes referred to as 

‘audits,’ but they are not full-scale audits as accountants commonly use that term.”43 In its most 

recent budget request, the CFTC more fully described FCM reviews (which have been grouped 

with examinations of major swap participants and swap dealers since May 2011) as follows:

While the bulk of the examinations of major swap participants and swap dealers 

will be performed by the NFA, the Commission will be required to undertake 

direct examinations of these entities in response to possible violations of the 

Commission’s regulations, or as part of the oversight of the NFA’s major swap 

participant and swap dealer surveillance program. The Commission also supports 

routine direct examinations of these entities as necessary for staff to obtain an 

understanding of the books and records, and general back-office operations. Such 

knowledge and familiarity of the operations of a major swap participant or swap 

dealer is necessary in order for staff to be properly prepared to respond in 

situations when these entities fail to meet its minimum financial requirements or 

other regulatory requirements. The Commission would focus its direct 

examinations that are not conducted on a for-cause basis on those entities that 

present the greatest potential exposure. These entities generally would be the most 

active and largest major swap participants and swap dealers, including the six 

members of the “G-14” dealers that are part of domestic banking organizations. 

 

confusion with the [HQ DSIO Supervisory Auditor]working in HQ (directly under the [HQ DSIO Senior 

Supervisory Auditor]), whose title was not changed. 

42 The CFTC General Counsel represents that delegations of authority were prepared as necessary to permit Ananda 

Radhakrishnan’s involvement in DSIO matters pertaining to MFGI, and to permit the [HQ DCR Supervisory 

Attorney] to represent the Commission in matters bankruptcy matters pertaining to MFGI (and normally charged 

to the OGC). 

43 Testimony of Gary Gensler, Chairman, CFTC, before the U.S. Senate Committee on Agriculture, Nutrition and 

Forestry, Washington, DC (Aug. 1, 2012). Available here: 

http://www.cftc.gov/PressRoom/SpeechesTestimony/opagensler-120.
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Approximately three-to-five staff members are required to conduct a limited 

scope direct examination of a large FCM or, as measured by regulatory capital 

and customer funds on deposit, other comparable intermediary. These 

examinations generally run for six months from start to report generation. Staff 

currently performs approximately 20 direct examinations each year.

44

In 2012, the Examinations Branch performed 17 reviews of FCMs. In 2012, the 

Examinations Branch made 21 referrals to Enforcement. It appears that Enforcement referrals 

were not formally tallied in prior years. 

CFTC’s Coordination with the Chicago Mercantile Exchange Regarding Monitoring of MFGI’s 

Customer Segregated Funds

Since 2000, designated self-regulatory organizations (“DSROs”) in the futures industry 

have been the primary regulators of FCMs, introducing brokers, commodity pool operators, and 

commodity trading advisors.45 The CME, a futures industry DSRO, was responsible for MFGI’s 

front-line oversight.46 As stated in the Trustee’s report: 

• “As MFGI’s DSRO, CME was responsible for: (i) conducting audits of MFGI on a riskbased cycle; (ii) reviewing the monthly and annual reports submitted by MFGI; and (iii) 

reporting any concerns or deficiencies in MFGI’s compliance with CFTC regulations.”47 

• “As MFGI’s DSRO, the CME was charged with supervising MFGI’s compliance with 

the financial and reporting requirements of the CEA and relevant CFTC regulations. In 

order to ensure compliance, the CME conducted periodic audits of the FCM and shared 

the results of the audit with the other regulatory bodies of which the firm is a member. 

The CME conducted audits of MFGI every nine to fifteen months pursuant to standards 

 44 CFTC FY 2013 Budget Publication, supra fn. 39, at page 39. 

45 In 2000, Congress sought “to transform the role of the Commodity Futures Trading Commission to oversight of 

the futures markets” and in so doing, amended Section 3 of the Commodity Exchange Act to state: “It is the 

purpose of this Act to serve the public interests through a system of effective self-regulation of trading facilities, 

clearing systems, market participants and market professionals under the oversight of the Commission.” Commodity 

Futures Modernization Act, sections 2 and 108, P.L. 106-554, 114 Stat. 2763A-365, 2763A-366 and 2763A-383. 

46 The CME formed in 1898 as a not-for-profit corporation. In 2000, CME became a share-holder corporation, and 

in 2002 CME Holdings completed its initial public offering, and is listed on the NASDAQ Global Select Market. In 

2007, CME Holdings merged with CBOT Holdings, and became CME Group. In 2008, CME acquired Credit 

Market Analysis Limited (and its subsidiaries), a provider of credit derivatives market data. Also in 2008, CME 

merged with NYMEX Holdings. In 2010, CME entered into a joint venture with Dow Jones Indexes to create CME 

Group Index Services, and acquired Elysian Systems Limited, and provider of electronic trading and market 

technology. Also in 2010, CME Clearing Europe became CME’s wholly-owned subsidiary established in London 

and recognized by the Financial Services Authority of the United Kingdom. CME Group 2010 Annual Report, page 

5 (2010) (http://files.shareholder.com/downloads/CME/2108553774x0x529156/D94F567D-ED01-46E1-911BA90183B37953/MostRecentAnnualReport.pdf). 

47 Trustee’s report at page 32, citing MF Global Bankruptcy: Hearing Before the H. Comm. on Financial Services, 

Subcomm. on Oversight and Investigations, 112th Cong. 2d Sess. (Dec. 15, 2011) (Testimony of Terry Duffy, Exec. 

Chairman, CME Group (“Duffy Testimony”) at 3). 
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13

and procedures established by the Joint Audit Committee (“JAC”) and reported such 

results to the CFTC and MFGI’s DCOs.”48

• “The most recent audit was as of January 31, 2011, which the CME completed in August 

2011 and which did not find any material problems with MFGI’s calculations of net 

capital, segregated amounts or secured amounts.”49

CFTC employees in the Examinations Branch told us that CFTC did not generally 

coordinate with CME in the ordinary course of their work, including the last week of MFGI’s 

existence. However, CFTC and CME were in regular communication during the final days of 

MFGI.

We asked about CME’s audits of FCMs, and specifically about the CME audit of MFGI

that took place earlier in 2011. This audit was reviewed at staff level in the Examinations 

Branch. 

The CFTC’s Major Review Branch (“Major Review”) has regulatory oversight 

responsibilities with regard to the DSROs as it pertains to DSRO oversight of FCMs. Major 

Review consists of two employees, a supervisory auditor who serves as Assistant Director for 

Major Review, and a senior auditor, located in CFTC’s Kansas City and Chicago field offices.50 

Major Review selects FCM audits performed by the DSROs for further review. Major Review 

does not perform a formal audit of the DSRO’s work product, but instead takes a random sample 

of data within a report and verifies the data. Major Review did not review any CME audits of 

MFGI during the period 2004-2011. To our knowledge Major Review reports are not made 

public. 

Examination Manuals and Guidance for Overseeing and Regulating MFGI

In October 2011 there was no specific manual for overseeing and regulating MFGI or any 

other FCM. We heard this from CFTC staff in New York, Chicago, and Kansas City. However, 

staff said they look to the CFTC’s guides intended for registrants, such as the Form 1-FR 

instructions,51 as well as the Commission’s Financial and Segregation Interpretation No. 4-1 

(Advisory Interpretation For Self-Regulatory Organization Surveillance Over Members' 

Compliance With Minimum Financial, Segregation, Reporting, and Related Recordkeeping 

Requirements),52 and also CFTC Interpretation 4-2 (Risk-Based Auditing).53 Staff also stated 

that they may consult the Joint Advisory Committee resources on its website.54

 48 Trustee’s report at page 45-46, citing MF Global Bankruptcy: Hearing Before the H. Comm. on Agriculture, 

112th Cong. 2d Sess. (Dec. 8, 2011) (Testimony of Dan Roth, Chairman/CEO, NFA (“Roth Testimony”) at 29; 

Duffy Testimony at 7). 

49 Trustee’s report at page 46. 

50 The Assistant Director and senior auditor each had over 20 years experience at CFTC in October 2011. 

51 Available here: http://www.cftc.gov/ucm/groups/public/@iointermediaries/documents/file/1frfcminstructions.pdf. 

52 Available here: http://www.cftc.gov/tm/finseginterp_4-1.htm. 
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14

Staff told us that each targeted review performed by the CFTC Examinations Branch in 

New York, Kansas City, and Chicago is tailored to address the unique issue and situation at 

hand, and therefore there is no general manual or generalized guidance to guide their work. 

Some staff were disgruntled with this situation, others found it appropriate. 

During our work on this project, we did learn from a retired CFTC employee that there 

was a checklist for FCM audits performed by the former Division of Trading and Markets in the

1980s, and it required verifying bank balances as represented by the FCM, as well as detailed 

verification of other FCM books, records, and representations. The checklist harkens to a time 

when there were fewer markets, and manual processes were still the norm. We do not know 

when the checklist was abandoned. 

Since the collapse of MFGI, CFTC has created a guide to reviewing the monthly 

financial statements it receives for all FCMs under its oversight. CFTC staff told us the new 

guide did not institute new procedures, but rather documented what they were already doing with 

regard to financial statement reviews. 

CFTC’s Oversight of MFGI after the CFTC’s Enforcement Actions in 2007 and 2009

The 2007 Enforcement Action 

CFTC’s 2007 Enforcement Action involved violations committed by MFGI and by 

Associated Person Thomas Gilmartin in connection with their oversight and recordkeeping 

pertaining to a hedge fund. The hedge fund traded through MFGI and was handled by Gilmartin

as an MFGI associated person. 

CFTC separately charged the hedge fund, Philadelphia Alternative Asset Management

Co. (PAAMCo), and its manager, Paul Eustace, in a 2005 complaint alleging that Mr. Eustace 

and PAAMCo concealed over $100 million in losses from participants in an off-shore hedge 

fund known as the Philadelphia Alternative Asset Fund, Ltd (the Off-shore fund).

55 This 

deception was accomplished through, among other things, backdating execution dates of certain 

trades executed through MFGI in order to bolster the apparent profitability of the Off-shore 

Fund. Eustace and PAAMCo were ordered to pay more than $279 million in restitution; 

Eustace was also ordered to pay a $12 million civil monetary penalty, and PAAMCo was ordered 

to pay an $8.8 million civil monetary penalty.56

 53 Available here: http://www.cftc.gov/tm/letters/99letters/tm99-32.htm. 

54 The Joint Advisory Committee website is here: http://www.wjammer.com/jac/. 

55 CFTC Obtains Federal Court Freeze of Assets of Philadelphia Company and its President in Fraud Action 

Involving Hedge Fund and $230 Million Commodity Pool, CFTC Press Release 5091-05, June 29, 2005, available 

here: http://www.cftc.gov/opa/enf05/opa5091-05.htm. 

56 Hedge Fund Trader Paul Eustace and Philadelphia Alternative Asset Management Co. Ordered to Pay More Than 

$279 Million to Defrauded Customers and More than $20 Million in Civil Monetary Penalties in CFTC Action, 

CFTC Press Release, Aug. 19, 2008, available at: http://www.cftc.gov/PressRoom/PressReleases/pr5531-08. See 

also, CFTC Obtains Federal Court Freeze of Assets of Philadelphia Company and its President in Fraud Action 
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Office of the Inspector General by CFTC

15

In a related action, Gilmartin and MFGI were charged with failing to diligently supervise 

the handling of the PAAMCo hedge fund accounts in that (among other things) they failed to 

respond to indications of questionable activity by Eustace. Gilmartin and MFGI were also 

charged with recordkeeping violations. The CFTC’s sanctions included civil monetary penalties 

against MFGI and Gilmartin in the amounts of $2 million and $250,000, respectively, and an 

order that Gilmartin never apply for registration or claim exemption from registration with the 

CFTC in any capacity. In addition, the CFTC’s order included a requirement that MFGI and 

Gilmartin pay a total of $75 million, consisting of $69 million for the benefit of the receivership 

estate, which the receiver managed on behalf of investors in the funds traded by Eustace and 

PAAMCo, and $6 million to reimburse the estate for the litigation costs of pursuing the claims 

against MFG and Gilmartin.57 

The 2007 Enforcement action against MFGI resulted in no change to CFTC’s oversight 

of MFGI. 

The 2009 Enforcement Action 

CFTC’s oversight of MFGI changed in 2008. Beginning in 2008, CFTC required MFGI

to post their daily “cap, seg, & secured” statements with CFTC, in order to keep currently 

informed of MFGI’s net capital calculations. This increased oversight of net capital was 

triggered by unauthorized trading by an MFGI employee in February 2008. A drastic change in 

MFGI’s net capital immediately reflected overnight losses by this trader totaling $141 million; 58

daily examination of the cap, seg & secured statement would permit CFTC to receive immediate 

notice of any similar losses. In 2009, CFTC filed and simultaneously settled charges against 

MFGI relating to risk supervision failures in four separate instances between 2003 and 2008 

(including the 2008 unauthorized trading), imposing a $10 million civil monetary penalty against 

MFGI, and requiring undertakings related to MFGI’s internal management processes.59 

 

Involving Hedge Fund and $230 Million Commodity Pool, CFTC Press Release 5091-05, June 29, 2005, available 

at: http://www.cftc.gov/opa/enf05/opa5091-05.htm. 

57 MF Global Inc. and Thomas Gilmartin to Pay More Than $77 Million to Settle Actions by CFTC and Receiver ad 

litem, CFTC Press Release 5427-07, Dec. 26, 2007, available at: 

http://www.cftc.gov/PressRoom/PressReleases/pr5427-07. 

58 On December 12, 2012, the trader admitted guilt in a federal criminal proceeding, and faced a maximum prison 

sentence of 10 years and a $1 million fine; the trader was sentenced to five years in prison. Former MF Global 

Trader Pleads Guilty in $141 mln Trading Loss, Ann Saphir, Thomson Reuters News & Insight, December 11, 

2012. http://newsandinsight.thomsonreuters.com/Legal/News/2012/12_-

_December/Former_MF_Global_trader_pleads_guilty_in_$141_mln_trading_loss/; Ex-MF Global Broker 

Sentenced to 5 Years for Rogue Trades, Andrew Harris, Bloomberg, April 17, 2013. 

http://www.bloomberg.com/news/2013-04-16/ex-mf-global-broker-sentenced-to-5-years-for-trades-correct-.html. 

59 CFTC Sanctions MF Global, Inc. $10 Million for Significant Supervision Violations between 2003 and 2008, 

CFTC Press Release 5763-09, Dec. 17, 2009, available here: 

http://www.cftc.gov/PressRoom/PressReleases/pr5763-09. Order available here: 

http://www.cftc.gov/ucm/groups/public/@lrenforcementactions/documents/legalpleading/enfmfglobalorder1217200

9.pdf. 
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Besides reviewing daily filings by MFGI following the trading incident in 2008, 

Examinations Branch section employees in Chicago were kept in the loop with regard to MFGI’s 

remediation efforts following the 2009 Enforcement action; they reviewed evaluation reports 

prepared pursuant to the settlement and participated in related presentations regarding MFGI’s 

undertakings pursuant to the settlement.

60 These follow-up activities, ongoing as late as May 

2011, did not focus on the protection of customer segregated and secured funds or related backoffice processes; rather, the focus was supervision of associated persons and internal controls 

designed to enhance risk management processes. 

CFTC’s Role in the Determination that Caused MFGI to Increase its Net Capital in August 2011

We copy the summary of the relevant facts from the Trustee’s report for purposes of 

background: 

In August of 2011, because of concerns about MF Global’s exposure to sovereign 

debt, the Financial Industry Regulatory Authority (“FINRA”) required MFGI to 

record additional capital charges to reflect risks associated with the European 

sovereign debt portfolio. The increased capital charges meant that, in FINRA’s 

view, MFGI had a net capital deficiency as of July 31, 2011, and MFGI had to restate its financial results in its July 2011 Financial and Operational Combined 

Uniform (“FOCUS”) report. As a result, MFGI underwent a $183 million capital 

infusion to satisfy the increased minimum net capital threshold under SEC 

uniform net capital Rule 15c3-1.61

CFTC staff and management told us they had no active role in the determination that 

caused MFGI to increase its net capital in August 2011. We reviewed Examination Branch staff 

notes and memoranda from August 2011 indicating they had current information and a full 

understanding of the situation, and there is no indication CFTC took an active role.62 This 

decision was governed by SEC regulations. There are no reports that MFGI directly used 

customer funds to invest in foreign sovereign debt, even though this would have been legal at the 

time under Commission Rule 1.25. Instead, it invested indirectly at the parent company level 

through repo transactions.63 

In December 2011, the Commission amended Commission Rule 1.25 to forbid, among 

other things, investment of customer segregated funds in foreign sovereign debt, as well as

transactions with affiliates. 64 

 60 Email dated May 9, 2011. Author: [HQ Enforcement Deputy Director]. Recipient: Ananda 

Radhakrishnan and the [HQ DSIO Senior Supervisory Auditor]; cc: David Meister (updating the 

Examinations Branch on upcoming presentations related to undertakings set out in the 2009 settlement with MFGI). 

61 Trustee’s report at 9.

62 August 31, 2011, CFTC staff notes regarding the FINRA action requiring MFGI to increase net capital. 

63 Trustee’s report at 63-71. 

64 The new rule, which also included other investment prohibitions and other provisions, became effective February 

17, 2012. 76 Fed. Reg. 78,776 (Dec. 19, 2011). http://www.gpo.gov/fdsys/pkg/FR-2011-12-19/pdf/2011-31689.pdf.
U.S. Commodity Futures Trading Commission REDACTED

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CFTC’s Activities with Respect to MFGI in the Week Prior to the Liquidation

We studied the period October 24 through November 9, 2011, in order to describe not 

only CFTC’s activities regarding the regulation of MFGI leading up to the bankruptcy, but also 

leading up to and including the Chairman’s non-participation statement and the appointment of 

Commissioner Sommers to take over regarding MF Global issues. 

Monday, October 24 – Wednesday, October 26

All CFTC staff and management interviewed were aware of and concerned for MFGI

during the early part of the last week of October 2011, due to the ratings downgrade on Monday 

the 24th and the earnings report on Tuesday the 25th. Apart from MFGI’s daily cap, seg and 

secured statements, it appears that Monday and Tuesday CFTC staff and management in Chicago 

and Agency-wide received their information from public reports.65 

Staff and management in Chicago continued to receive daily cap, seg, and secured 

statements on Monday, Tuesday, and Wednesday of that week. The downgrade negatively 

impacted all numbers on Tuesday (reported to CFTC on Wednesday); however, the cap, seg, 

and secured nevertheless reported excess seg, excess secured, and excess capital. On 

Wednesday, the Enforcement Officer of the Day received an inquiry from an MFGI customer 

asking if his account equity “was segregated or protected against forfeiture.” The [CH DSIO 

Audit Team Leader] spoke with the customer; the [HQ DSIO Senior Supervisory 

Auditor] asked her to give a “[g]eneral discussion of what protections apply to futures and 

don’t apply to FOREX accounts.”66 The [CH DSIO Audit Team Leader Supervisor]

did not alter a previously approved recurring telework day scheduled for Thursday, October 27, 

and on Tuesday, October 25, the [HQ DSIO Senior Supervisory Auditor] approved an 

additional episodic telework day for the [CH DSIO Audit Team Leader Supervisor] on 

Friday, October 28. 

Staff in the New York DSIO Audit and Financial Review Office told us they were aware 

of the ratings downgrade and earnings report, and were not involved with MF Global during the 

early part of the final week. 

At CFTC headquarters, staff and management at all levels likewise indicated they were 

aware of the ratings downgrade on Monday the 24th and the earnings report on Tuesday the 25th, 

and were concerned. The Director of Swaps and Intermediary Oversight, Gary Barnett, had been 

 65 The Chairman and a supervisory economist in the Division of Market Oversight (Chicago Office) received an 

email on October 18 expressing general concern for MFGI’s financial health and the protection of customers; it did 

not specifically allege that MFGI was under seg or undercapitalized, and it does not appear that this email was 

circulated or brought to the attention of CFTC officials with responsibility for oversight of MFGI. 

66 Email dated October 26, 12:51pm. Author: [DOE Staff Member 1] (Enforcement Officer of the Day). 

Recipient: the [HQ DSIO Senior Supervisory Auditor]. The [HQ DSIO Senior Supervisory 

Auditor] forwarded the email to the Chicago FCM review team, and the [CH DSIO Audit Team Leader 

Supervisor] assigned the matter to the [CH DSIO Audit Team Leader]. 
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in place only since August 28 of that year; October 24 was his 57th day at CFTC. He was not 

involved with MFGI in the early part of the week. Mr. Barnett stated he depended on 

management in Chicago to keep him updated. The Director of Clearing and Risk, Ananda 

Radhakrishnan, also was not involved with MFGI in the early part of the week. 

MFGI emails received from the Trustee indicate that on Monday, October 24, 2011,67

MFGI management prepared briefing points for the CME, CBOE, FINRA, and the NY Fed,68

but determined not to brief the SEC and CFTC regarding MFGI’s response to the downgrade.69 

Essentially, MFGI informed the other entities that it disagreed with Moody’s characterization of 

MFGI’s risk management and controls, and stated that MFGI remained confident that it had 

sufficient resources. MFGI staff and management discussing this issue included [MFGI 

Employee 3], Laurie Ferber, Christine Serwinski, [MFGI Employee 1], and [MFGI 

Employee 2].

CFTC staff did have mundane contact with MFGI during the early part of the week. 

[MFGI Employee 3] of MFGI spoke with a staff auditor in the Chicago CFTC DSIO office to 

get advice on a press report. The staff auditor agreed with [MFGI Employee 3] that the report 

was erroneous, and recommended contacting the reporter directly.70 

The Chairman was aware of the events of the 24th and 25th; in the early part of the week 

he got his information from public reports. On Wednesday, October 26th, Mr. Radhakrishnan 

briefed senior staff on MFGI, with the approval or at the request of the Chairman. Staff recalled 

that the Chairman discussed MFGI at this meeting and predicted based on his industry 

experience that MFGI could collapse by the end of the week. 

On Wednesday, October 26, the Chairman went to the Division of Clearing and Risk at 

CFTC headquarters and asked staff to obtain documentation of MFGI’s current customer fund 

balances. Separately, on Wednesday Securities and Exchange Commission (SEC) employees in 

New York called CFTC staff in DSIO in the New York office and requested CFTC attendance at 

a meeting scheduled at MFGI headquarters in New York on Thursday. These two requests –

from the Chairman and from the SEC – motivated CFTC staff to be present in MFGI’s Chicago 

and New York offices on Thursday, with some employees recalling they went over on Thursday 

at the request of the Chairman, others at the request of the SEC. 

It appears that New York staff took the lead in organizing staff participation. New York 

staff clarified that the books and records for the FCM were in Chicago, that the [CH DSIO 

Audit Team Leader Supervisor] and the [CH DSIO Audit Team Leader] were 

 67 Each email discussed in this report was created in 2011, unless otherwise noted. 

68 Email dated Oct. 24, 3:01 pm (EST). Author: Laurie Ferber. Recipients: Christine Serwinski, [MFGI Employee 

1], [MFGI Employee 2], [MFGI Employee 3].

69 Email dated Oct. 24, 8:31 pm (CST). Author: Christine Serwinski. Recipients: Laurie Ferber, [MFGI 

Employee 1], [MFGI Employee 2], [MFGI Employee 3].

70 Email dated October 24, 1:49 pm (CST). Author: Christine Serwinski. Recipient: [MFGI Employee 1]. Cc: 

[MFGI Employee 3]).
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“heavily involved” with MFGI in Chicago, and that both the Chicago and New York CFTC 

DSIO would send people to the Thursday meeting.71 While there was debate about the role of 

the SEC in reviewing documentation housed with the FCM, the message from CFTC 

management was clear: “I am only concerned that we’re part of a ‘joint’ regulatory visit to our 

common registrant.”72 Preparations for the meeting included plans to request documentation of 

segregated and secured funds as of October 26. 

Email received from the MFGI Trustee indicates that on October 26 MFGI prepared for 

the same meeting from their end,73 and that on the 26th MFGI also began coordinating a 

document request from CBOE and FINRA for daily liquidity numbers on the reverse repos (i.e., 

house information not FCM information) and the corresponding rates as well as daily reports 

regarding current available credit line from affiliates.74

Thursday, October 27

Email received from the MFGI Trustee indicates that CBOE and FINRA required early 

submission of net capital figures on October 27.75 

Ananda Radhakrishnan requested a separate briefing by MFGI to take place on October

27, prior to the scheduled 2 pm meeting.76 Laurie Ferber informed Mr. Radhakrishnan that they 

were already “interacting with several CFTC people,” and that CFTC and SEC representatives 

would be on site at a meeting scheduled that afternoon, and asked Mr. Radhakrishnan to “please 

let me know if at any time you would like us to provide a general overview briefing or any 

updates to you or any of your staff.”77 They settled on 10:00 am (EST) for a phone briefing, and 

Mr. Radhakrishnan gave Ms. Ferber the dial-in and passcode numbers for this call.78 

 71 Email dated October 26, 12:54 pm (EST). Author: [NY DSIO Audit Team Leader 2] . Recipients: [NY 

DSIO Supervisory Auditor], [NY DSIO Audit Team Leader 1] , [NY DSIO Audit Team Leader 3], 

and the [NY DSIO Audit Team Leader Supervisor]. 

72 Email dated October 26, 5:39 pm (EST). Author: the [NY DSIO Audit Team Leader Supervisor]. 

Recipients: [NY DSIO Audit Team Leader 2] , and the [CH DSIO Audit Team Leader Supervisor]. 

73 Email dated October 26, 8:53 pm (EST). Author: Laurie Ferber. Recipients: Henri Steenkamp, Christine 

Serwinski, John Corzine, [MFGI Employee 4]. 

74 Email dated October 26, 10:17 pm (EST). Author: Christine Serwinski. Recipients: [MFGI Employee 1], 

[MFGI Employee 2], [MFGI Employee 3], Vinay Mahajan, Edith O’Brien, [MFGI Employee 4], and Laurie 

Ferber. 

75 Email dated October 27, 7:53 am (CST). Author: [MFGI Employee 5]. Recipients: Edith O’Brien and [MFGI 

Accountant 1]. 

76 Email dated October 27, 8:08 am (EST). Author: Ananda Radhakrishnan. Recipient: Laurie Ferber. Cc: the 

[HQ DSIO Senior Supervisory Auditor], and [HQ DCR Deputy Director].

77 Email dated October 27, 7:06 am (EST). Author: Laurie Ferber. Recipient Ananda Radhakrishnan.

78 Email dated October 27, 8:57 am (EST). Author: Ananda Radhakrishnan. Recipient: Laurie Ferber. Cc: the 

[HQ DSIO Senior Supervisory Auditor], [HQ DCR Deputy Director], [CH DCR Supervisory Risk 

Analyst] , the [HQ DCR Senior Supervisory Attorney] , the [HQ DSIO Supervisory Auditor], the 

[CH DSIO Audit Team Leader Supervisor], [DCR staff]. 
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During the morning and early afternoon of October 27th, CFTC NY DSIO staff continued 

to plan for the afternoon meeting, stating that “at minimum” CFTC would retrieve the “seg and 

secured statement for the last week of business,” along with an explanation of the customer funds 

investments reported in the September 30 seg statement as well as background information 

regarding the August 2011 increase in net capital required by FINRA.79 The[CH DSIO Audit 

Team Leader Supervisor] and CFTC DSIO staff in Chicago were able to provide this 

information. 

Email received from the Trustee indicates MFGI held a pre-meeting at 11 am (EST) to 

prepare for the afternoon meeting.80 Also prior to the 2 pm meeting, the SEC contacted CFTC 

New York DSIO staff to arrange a post-meeting with representatives of SEC, CFTC, and the NY 

Fed.81 

On Thursday, October 27, the Chairman was informed that CFTC staff was on site at 

MFGI. The meeting took place at 2 pm (EST), and CFTC reports that the [CH DSIO Audit 

Team Leader], and three staff auditors were on site at MFGI’s Chicago Office,

82 and [NY 

DSIO Audit Team Leader 2], along with DSIO staff auditors [NY DSIO Staff Auditor 

2] and [NY DSIO Staff Auditor 1], were on site in New York.83 The [CH DSIO Audit 

Team Leader Supervisor] participated by phone during her regularly recurring telework 

day.84 The [CH DSIO Audit Team Leader Supervisor] represented she would not have 

gone with staff to the MFGI Offices as her supervisory duties pertained to the team responsible 

for MFGI as well as other teams; moreover, CME was reporting MFGI compliant with all 

obligations throughout the week. The [NY DSIO Audit Team Leader Supervisor] did 

not visit the MFGI New York Offices.

 79 Email dated October 27, 9:45 am (EST). Author: [NY DSIO Audit Team Leader 2] . Recipients the [CH 

DSIO Audit Team Leader Supervisor], the [CH DSIO Audit Team Leader]. Cc: [NY DSIO Staff 

Auditor 1], [NY DSIO Staff Auditor 2]. 

80 Appointment notice for meeting to be held October 27 at 11 am (EST), subject “Prep for SEC/CFTC Meeting;” 

required attendees: Michael Stockman, Vinay Mahajan, Edith O’Brien, [MFGI Employee 6], [MFGI Employee 

3], [MFGI Employee 2], Christine Serwinski, [MFGI Employee 7], [MFGI Employee 8], [MFGI 

Employee 9], [MFGI Employee 10]; optional attendees: Laurie Ferber, [MFGI Employee 4], Henri 

Steenkamp, Bradley Abelow. 

81 Email dated October 27, 1:01 pm (EST). Author [NY DSIO Audit Team Leader 2]. Recipients: the [CH 

DSIO Audit Team Leader], the [CH DSIO Audit Team Leader Supervisor]. Cc: the [HQ DSIO 

Senior Supervisory Auditor], the [NY DSIO Audit Team Leader Supervisor]. 

82 440 South La Salle St., Chicago, IL, about a 15 minute walk from the CFTC Chicago Office located at 520 W. 

Monroe. 

83 Email dated October 27, 1:50 pm (EST), announcing Chicago attendees at the meeting. Author: Chicago staff 

auditor [CH DSIO Staff Auditor 2]. Recipient: [MFGI Employee 11]. Cc: [MFGI Employee 3], 

Christine Serwinski. MFGI’s New York Office, 55 East 52nd St, NY, NY., was about 7 miles or a 15-30 minute cab 

ride from the CFTC New York Office at 140 Broadway, NY, NY. 

84 The CME timeline (at page 11 of the .pdf) differs; it states that the [CH DSIO Audit Team Leader 

Supervisor] was on site at MFGI on October 27. 
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About a half hour after Chicago CFTC DSIO staff arrived at MFGI, representatives of 

CME also arrived. This meeting was not planned. CFTC New York DSIO staff did not see 

CME staff at the meeting in New York. Around 4:30 pm (EST) the [CH DSIO Audit Team

Leader] requested “all supporting documentation for the October 26, 2011, Segregation and 

Secured Computations,” including:

• Bank statements

• Exchange Statements

• Carrying Broker Statements

• Firm reconciliations

• Moneyline report

• Investment reports

• Basically, all supporting documentation used to prepare the segregation and 

secured computations.85

Email received from the Trustee indicate that MFGI considered the request to come from 

CFTC and CME, set up a special file to hold the responsive documents,86 and assigned the 

following MFGI employees and operating divisions to CFTC’s request, as follows:87

1. Bank statements [MFGI Employee 12]

2. Exchange Statements [MFGI Employee 13]

3. Carrying Broker Statements [MFGI Employee 13]

4. Firm reconciliations [MFGI Employee 13]

5. Moneyline report REGULATORY

6. Investment reports TREASURY

 85 Email dated October 27, 3:37 pm (CST). Author: the [CH DSIO Audit Team Leader]. Recipient: [MFGI 

Employee 15]. 

86 Email dated October 27, 4:42 pm (CST). Author: [MFGI Employee 15]. Recipients: [MFGI Employee 12], 

[MFGI Employee 13], [MFGI Employee 5], [MFGI Employee 14]. Cc: Edith O’Brien, [MFGI Employee 

3]. 

87 Email dated October 27, 3:52 pm (CST). Author: [MFGI Employee 15]. Recipients: Edith O’Brien, [MFGI 

Employee 14]. Cc: [MFGI Employee 3], Christine Serwinski, [MFGI Employee 2]. 
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7. Internal reverse repurchase TREASURY-REPO VALUATION

agreements shown on a mark to

market investment summary report.

 

The [CH DSIO Audit Team Leader] left the MFGI Chicago Office at the end of the 

day on October 27 without the records. Email received from the Trustee indicates that MFGI

began emailing responsive documents to Chicago DSIO staff on Friday.88

Friday, October 28

In the morning of October 28, 2011, the Chairman reviewed with staff financial 

information for MFGI as well as its FOCUS report for September 30. The Chairman noticed a 

$600 million decrease in 30.7 funds from close of September to October 27. He learned from 

staff that MFGI was compliant with CFTC regulations under the so-called alt method, meaning 

in the event of bankruptcy customer secured funds may not be sufficient to cover customer 

account balances.89 He also noticed a tri-party repo with an entity called “MF Securities.” 

Chairman Gensler directed Ananda Radhakrishnan and staff in headquarters to obtain 

documentation for the tri-party repo, including evidence of the collateral (i.e., securities on 

hand). He also directed CFTC staff to obtain documentation of MFGI’s seg balances. CFTC

staff briefed him on MFGI’s attempts to find a buyer and told him which companies were 

interested in purchasing MFGI at that time. During the morning, Chairman Gensler along with 

Mr. Radhakrishnan spoke briefly with CME Executive Chairman Terry Duffy about MFGI

customer funds status.90 

 88 Email dated October 28, 2011, 2:56 pm (CST). Author [MFGI Employee 5]. Recipient: the [CH DSIO 

Audit Team Leader](attachments: money line documents for October 26). 

89 From the Trustee’s Report, page 37:

 There are two methods under which a FCM may compute its secured amount requirement. The common method 

historically used by FCMs to determine their secured amount requirement is the Net Liquidating Method, which is 

calculated from the sum of the net liquidating value of customer accounts plus any customer securities held (the 

“Netliq Requirement”). (See Foreign Futures and Options Guide, The Joint Audit Committee, December 2001, at 5-

5.) This method mirrors the computation used to calculate the Segregation Requirement for customer trading on U.S. 

exchanges. Alternatively, an FCM may elect to use the Alternative Method in calculating the secured amount 

requirement. The Alternative Method is the sum of an account’s risk maintenance margin requirement (“MMR”), 

open trade equity (“OTE”), securities and net options value (“NOV”) (the “Alternative Secured Requirement”). See 

17 C.F.R. § 1.3(rr); Foreign Futures and Options Guide, The Joint Audit Committee, December 2001, at 5-6. 

 The Alternative Secured Requirement is computed on a customer account by customer account basis and results 

in a significantly lower regulatory requirement as compared to the Netliq Requirement. Thus, use of the Alternative 

Method meant that the regulatory requirement for funds to be kept in secured accounts — the Alternative Secured 

Requirement — was significantly lower than actual customer net liquidating balances. The Secured Statement filed 

with the regulators showed the amount required to be secured under the Alternative Method. The “Regulatory 

Excess” was the difference between the Netliq Requirement and the Alternative Secured Requirement. Prior to the 

acquisition of Refco, MFGI used the Net Liquidating Method, while Refco used the Alternative Method. Around the 

time MFGI acquired the assets from Refco in 2005, MFGI decided to use the Alternative Method. 

90 CME Timeline, supra fn. 5, at page 12 of the .pdf. 
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Also during the morning, the Chairman participated in a conference call in CFTC staff 

offices with Ananda Radhakrishnan, Gary Barnett, the [HQ DSIO Senior Supervisory 

Auditor], and from MFGI Laurie Ferber and Edith O’Brien, in which CFTC wanted to know 

what steps MFGI was taking to increase liquidity.

Later that morning, the Commission’s regularly scheduled closed surveillance meeting 

took place at 11 am.91 MFGI was not on the meeting agenda, but the Chairman asked at the start 

of the meeting for an update. The [HQ DSIO Senior Supervisory Auditor] did not 

attend; he left early that day to begin a one week vacation, and spoke with the [CH DSIO 

Audit Team Leader Supervisor] before he left for the day.92 

The [HQ DSIO Supervisory Auditor] presented information to the Commission 

regarding MFGI. She told the Commission that MFGI was an FCM registered with the CFTC 

and a broker-dealer registered with the SEC, that all information from MFGI filings indicated 

that MFGI was presently in compliance with regulatory requirements, and that CFTC staff were 

in the NY and Chicago offices of MFGI on Thursday and that day. She gave the current excess 

seg and secured balances reported by MFGI. She stated that MFGI was reporting full 

compliance with capital requirements. She stated that 44% of the reported seg funds were held 

at the various clearing houses and that CFTC staff was in the process of getting further detailed 

information about the funds that were not held at the clearing houses. She stated that staff would 

be getting additional detail for secured funds as well. 

Chairman Gensler stated that MFGI’s handling of seg funds tests the requirements of 

CFTC regulation 1.25. The Chairman stated his concern that 56% of MFGI’s customer money 

may be inside the MF broker-dealer funding their house securities positions. Staff stated that 

MFGI was one of the proponents of keeping the status quo for regulation 1.25, noting that inhouse transactions either have to be unwound every day or on demand, and must be retained in 

an account that is denominated as a 4d customer account with segregation. 

Mr. Radhakrishnan explained that the recent multiple ratings downgrades made it much 

more expensive for MFGI to borrow money, and indicated that counterparties likely would 

refuse to do business with MFGI, causing liquidity issues. The question would be whether 

MFGI could continue to borrow money and sell off house assets sufficient to permit it to meet 

net capital requirements during the liquidity drain. 

Staff explained that the ratings downgrade was due to trade activity not by the FCM or its 

customers, but at the holding company level. Staff explained that the holding company was 

invested in sovereign debt, providing information that accorded with public accounts available at 

that time. Staff explained the FINRA determination in August 2011 that caused the holding 

 91 The Sunshine Act notice is published here: 76 Fed. Reg. 59118 (Sept 23, 2011). 

http://www.gpo.gov/fdsys/pkg/FR-2011-09-23/pdf/FR-2011-09-23.pdf.

92 The [HQ DSIO Senior Supervisory Auditor] was updated and in communication with CFTC during the 

final days of MFGI. He told us he would have skipped the vacation if he had not received confirmation on Friday 

that MFGI was reporting compliance with cap, seg, and secured requirements, and that CME was reporting MFGI’s 

compliance with exchange obligations. 
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company to increase its haircuts on sovereign debt and report a retroactive net capital deficiency 

for July 2011. Staff stated that the size of the sovereign debt holdings caused the ratings 

downgrades. 

Mr. Radhakrishnan discussed the possibility of a sale of MFGI and with staff explained 

the process. Staff stated they had been and would continue to be in contact with the SEC, the 

NY Fed, and the exchanges. 

As he did during the Senior Staff meeting on Wednesday, the Chairman again predicted 

that, based on his market experience, these situations usually do not last long and predicted that 

MFGI would be gone before the next NY Fed auction scheduled the following week. 

Staff emphasized that the FCM was stable but would very likely have to be sold due to 

the liquidity crunch caused by the ratings downgrade. The Chairman emphasized that the 

CFTC’s regulatory remit is the protection of customer funds and of the clearing houses. The 

Chairman also continued to express concern regarding the treatment of customer funds by MFGI. 

Staff stressed that a sale of the FCM, with transfer of customer accounts and positions, would be 

the best outcome. 

During the discussion of MFGI at Friday’s surveillance briefing there was no discussion 

of whether customers were withdrawing funds from MFGI. NY Times reports on October 26 

and 27 did not indicate customers were leaving the firm, while Fox Business News claimed the 

opposite.93 Later, the Trustee would report that there was a run on the bank during its last week 

of operation, stating that “[t]he simultaneous occurrence of a customer ‘run on the bank’ and 

unwinds of repo counterparty and proprietary positions within a three-day timeframe 

overwhelmed the Firm.”94

In the afternoon of Friday October 28, staff continued to exchange information with 

FINRA; the [CH DSIO Audit Team Leader Supervisor] spoke to Grace Vogel at 

FINRA and informed the [HQ DSIO Senior Supervisory Auditor], as well as the [HQ 

DSIO Supervisory Auditor] and the [CH DSIO Audit Team Leader], that MFGI was 

in liquidity mode, looking for a buyer, gave the anticipated buyer, and further stated that the 

 93 Although the Trustee reported that there was a “run on the bank” at MFGI during its last week, it does not appear 

to have been widely reported at the time. On October 26 the New York Times reported “it is not clear whether 

[MFGI’s] clients are staying put.” Europe’s Debt Threatens MF Global, and Corzine, NY Times, Oct 26, 2011, 

9:16 PM (http://dealbook.nytimes.com/2011/10/26/europes-debt-threatens-mf-global-and-corzine/). On October 

27, the New York Times, claiming to have information from “people close to MF Global,” reported that “as of 

Thursday afternoon, only a small percentage of client funds – in the low single digits – had left the firm.” MF 

Global Fights to Stay Afloat After Two Credit Downgrades, NY Times, Oct 27, 2011, 3:41 pm (updated 9:07 

pm)(http://dealbook.nytimes.com/2011/10/27/mf-global-shares-continue-plunge-after-fitch-downgrade/ ). However, 

on October 28, Charles Gasparini of Fox Business News reported that customers were fleeing and there was a run on 

the bank at MF Global. Fox Business Network: MF Global "Will Not Survive The Weekend,” October 28, 2011, © 

2011 Benziga.com. 

94 Trustee’s report, page 149. 
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parent corporation was continuing to sell its house positions.95 The [HQ DSIO Supervisory 

Auditor] let the [CH DSIO Audit Team Leader Supervisor] and others know that the 

Chairman and Mr. Radhakrishnan had separately spoken with Grace Vogel.96 Ms. Vogel 

discussed potential buyers for MFGI. The Chairman spoke with Grace Vogel from his home that 

evening, and learned that “MF Securities” was not known to her as an MF Global entity. 

[HQ DCR Senior Supervisory Attorney] began preparing for a possible 

bankruptcy of the FCM, and exchanged email with Ken Caputo, an attorney for SIPC, discussing 

the provisions CFTC would need in any bankruptcy filing and asking that CFTC be furnished a 

draft prior to any filing. 

Throughout October 28th, CFTC staff and management were also in communication with 

CME requesting information regarding the location of segregated funds that were not with the 

clearinghouse, as well as the status of secured fund balances, which were being requested to be 

raised to the net liq requirement rather than the alt method amount. CME represented that MFGI

was in compliance with its obligations to CME as of October 26.97 During the afternoon, Mr. 

Radhakrishnan and the [HQ DSIO Supervisory Auditor] spoke with CME President 

Kimberly Taylor and [CME Manager 1], and around 5 pm (EST) the [HQ DSIO 

Supervisory Auditor] informed staff and management that MFGI had committed to 

increasing secured funds from the smaller amount permitted under the alt method to the net liq 

amount that would be required for 4d seg.98 A short time later, staff reported participation in a 

Joint Advisory Committee (JAC) teleconference, and informed that all of the exchanges reported 

MFGI was meeting its obligations and that “some” customers had transferred their accounts.99 

An update JAC call was scheduled for Monday October 31, 10 am.100 

 95 Email dated Friday October 28, 2:26 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: the [HQ DSIO Senior Supervisory Auditor] and the [CH DSIO Audit Team 

Leader]. 

96 Email dated Friday October 28, 2:56 pm (CST). Author: the [HQ DSIO Supervisory Auditor]. Recipients: 

the [CH DSIO Audit Team Leader Supervisor], the [HQ DSIO Senior Supervisory Auditor], and 

the [CH DSIO Audit Team Leader]. Cc: Ananda Radhakrishnan and Gary Barnett.

97 Email string dated Friday, October 28, beginning 10:37 am and continuing to 2:44 pm (EST), between and among 

[CME Auditor 1], [CME Auditor 2], [CME Manager 1], [CME Auditor 3], as well as the [HQ DSIO 

Senior Supervisory Auditor], the [HQ DSIO Supervisory Auditor], the [CH DSIO Audit Team 

Leader Supervisor], the [CH DSIO Audit Team Leader], and Ananda Radhakrishnan. 

98 Email dated Friday, October 28, 4:57 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. Recipient: 

the [HQ DSIO Senior Supervisory Auditor]. Cc: Gary Barnett, Ananda Radhakrishnan, and the [CH DSIO 

Audit Team Leader Supervisor]. Increasing the secured funds to the net liq method was necessary to prevent 

a potential shortfall in customer funds to assure distribution to customers in the event of a SIPC or bankruptcy filing 

(but was not necessary in order to assure compliance with CFTC regulations). 

99 Email dated Friday, October 28, 5:19 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. Recipients: 

the [HQ DSIO Senior Supervisory Auditor], Gary Barnett, and Ananda Radhakrishnan; cc: the [CH DSIO 

Audit Team Leader Supervisor]. 

100 Email dated Friday, October 28, 5:19 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. 

Recipients: the [HQ DSIO Senior Supervisory Auditor], Gary Barnett, and Ananda Radhakrishnan. Cc: 

the [CH DSIO Audit Team Leader Supervisor]. 
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In addition, on October 28, 2011, a CFTC New York DMO staffer sent to MFGI an 

“urgent” request for the large trader file for October 27, 2011, naming two specific entities to be 

included in the response. 101 MFGI satisfied the request in about twenty minutes.102 

In the morning on Friday, October 28, the [CH DSIO Audit Team Leader], and two 

staff auditors headed over to the Chicago Office of MFGI to collect the documentation for the 

cap, seg, and secured statement issued on Thursday, October 27.103 This would permit CFTC to 

verify the reported seg and secured customer fund amounts as of the close of business on 

Wednesday, October 26. The request for documentation had been made the day before and 

MFGI had yet to fulfill it. CME staff arrived within 30 minutes of CFTC staff; just as on 

Thursday, CME’s arrival was by coincidence and was not planned. CFTC Staff did not visit the 

MFGI NY Office. 

CFTC staff told OIG that they were not going to leave MFGI’s Chicago Office on Friday 

without documentation to support Wednesday’s cap, seg, and secured statement, and MFGI gave 

the disc to CFTC staff around 5:30 pm, and receipt of the disc was reported to the [CH DSIO 

Audit Team Leader Supervisor] by phone. Interviews with CFTC staff indicate that 

documents were received piecemeal, with MFGI sending by email what they could, and the rest 

being furnished to CFTC staff at the end of the day on a disc, because the thumb drive used by 

CFTC staff was not compatible with MFGI’s systems.104 

CFTC staff told us they reviewed the disc after they received it and used the records to 

complete testing for Wednesday’s cap, seg, and secured statement. Staff told us the supporting 

documentation appeared to be in order; however, CFTC staff later learned that there were 

transactions that were not booked and not included. Therefore, it appears CFTC received 

documentation for a cap, seg, and secured statement that was inaccurate. 

The Trustee’s report is enlightening on this point. According to the Trustee, as of 

October 26, MFGI erroneously reported to CFTC and others excess seg funds of more than $116 

million rather than revealing a seg deficiency exceeding $298 million.105 And, of course, by the 

 101 Email dated October 28, 1:03 pm (EST). Author: [NY DMO Staff 1]. Recipient: [MFGI Employee 16]. 

Cc: [MFGI Employee 17]. 

102 Email dated October 28, 1:26 pm (EST). Author: [NY DMO Staff 1]. Recipient: [MFGI Employee 18]. 

Cc: [MFGI Employee 17] and [MFGI Employee 19] (confirming receipt of the file). 

103 The CME timeline differs; it indicates that the [CH DSIO Audit Team Leader Supervisor] was also on 

site on October 28. (CME timeline, supra fn. 5, at page 12 of the .pdf.)

104 CFTC staff told us that secure thumb drive compatibility issues are not unusual. 

105 The Trustee’s report described the error as follows (at page 122, footnote omitted): 

The Trustee’s investigation has revealed that, while some personnel may have believed they were still in regulatory 

compliance, MFGI experienced a shortfall in 4d customer funds beginning during the day on Wednesday October 

26. When the Segregation Statement was prepared on October 27 as of the close of business on October 26, it 

showed an excess of $116,164,133. A review by the Trustee’s professionals, however, revealed that MFGI had 

failed to deduct $415 million of outgoing wires from the segregated assets, which overstated the cash balances that 

day by $415 million. (See Annex D.) When that error is taken into account, there is a deficiency of Customer 
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time CFTC on Friday, October 28th, received MFGI’s documentation for Wednesday’s 

erroneous seg balances, the seg deficiency had grown. 

The [CH DSIO Audit Team Leader Supervisor] spoke with the [CH DSIO 

Audit Team Leader], Grace Vogel, and the [HQ DSIO Supervisory Auditor]

throughout the day. 

Saturday, October 29

On Saturday, October 29, nobody from CFTC attended the MFGI Offices in Chicago or 

New York. In the morning the Chairman spoke briefly with Terry Duffy, CME, regarding 

customer funds. Around 10:45 am, the [HQ DSIO Senior Supervisory Auditor]

emailed the [HQ DSIO Supervisory Auditor] and let her know he had been in 

communication with [SEC Senior Auditor 2]; he asked the [HQ DSIO Supervisory 

Auditor] to update SEC with all current information.106 Around 12:30 pm, the [HQ DSIO 

Supervisory Auditor] let the [HQ DSIO Senior Supervisory Auditor] and others 

know that CFTC and SEC were keeping the lines of communication open and that the [CH 

DSIO Audit Team Leader Supervisor] would be speaking with CME later that day. 

Essentially, everyone was waiting for the sale to take shape and agreed to email notice of any 

significant new developments, with the ultimate purchaser likely to be known on Sunday. An 

update call was scheduled for 10 am on Sunday.107 

Around 4:00 pm on Saturday, Ananda Radhakrishnan notified staff and management at 

CFTC that the Chairman had spoken with Mary Miller108 and learned that the NY Fed revoked 

MFGI’s primary dealer license. Ananda also informed staff and management that MFGI

retained Sullivan and Cromwell to advise regarding the possible sale and possible bankruptcy.109

The [HQ DSIO Supervisory Auditor] let people know that Bloomberg was reporting that 

the holding company was discussing options for sale.110 

 

Segregated funds in the amount of $298,835,867 on October 26. This deficiency continued and increased throughout 

the week.

106 Email dated October 29, 10:44 am (EST). Author: the [HQ DSIO Senior Supervisory Auditor]. 

Recipient: the [HQ DSIO Supervisory Auditor]. 

107 Email dated October 29, 12:26 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. Recipients: the 

[HQ DSIO Senior Supervisory Auditor], the [CH DSIO Audit Team Leader Supervisor], Gary 

Barnett, and Ananda Radhakrishnan. 

108 Mary Miller, Under Secretary for Domestic Finance, U.S. Treasury. 

http://www.treasury.gov/about/organizational-structure/Pages/miller-e.aspx. 

109 Email dated October 29, 4:10 pm (EST). Author: Ananda Radhakrishnan. Recipients: [HQ DCR Deputy 

Director], the [HQ DCR Senior Supervisory Attorney] , [CH DCR Supervisory Risk Analyst], the 

[HQ DSIO Senior Supervisory Auditor], the [CH DSIO Audit Team Leader Supervisor], the [HQ 

DSIO Supervisory Auditor], Gary Barnett; cc: [HQ DCR Supervisory Attorney], [Chairman’s 

Office Attorney 1]. 

110 Email dated October 29, 4:31 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. Recipients: 

Ananda Radhakrishnan, the [HQ DSIO Senior Supervisory Auditor], the [CH DSIO Audit Team Leader 

Supervisor], Gary Barnett. 
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The Chairman called the [HQ DCR Senior Supervisory Attorney] at 7 pm on 

Saturday evening. He didn’t reach him immediately, but on Saturday evening the Chairman 

spoke with him, along with Gary Barnett, and Ananda Radhakrishnan, got a status update, and 

again asked for documentation of the tri-party repo and for verification of MFGI’s assertion on 

Friday that the Part 30 funds would be increased from the alt method amount to the net liq 

amount. He also wanted Friday’s cap, seg and secured numbers. He did not want to wait until 

Monday at noon for the Friday cap, seg, and secured statement. Separately, the Chairman 

learned from Grace Vogel that [a Sullivan and Cromwell Attorney] was representing 

MFGI in connection with the possible sale and possible bankruptcy. 

Around 9 pm on Saturday the Chairman spoke with [the Sullivan and Cromwell 

Attorney]. The Chairman asked if CFTC staff could get briefed on any bankruptcy 

contingency plans, and [the Sullivan and Cromwell Attorney] agreed. Around 10:30 

pm the Chairman spoke with Chairman Mary Schapiro of the SEC to discuss status. After the 

10:30 pm phone call, the Chairman called [the Sullivan and Cromwell Attorney] a 

second time to discuss the probability of a bankruptcy filing. At 11:30 pm on Saturday, 

Chairman Gensler received a call from CFTC staff and at their request joined an ongoing 

conference call with Laurie Ferber, Brad Abelow, the [HQ DCR Senior Supervisory 

Attorney], and Gary Barnett, and others. This call was the briefing on bankruptcy 

contingency plans for the holding company, with a companion sale of the FCM MFGI. 

Chairman Gensler had requested this briefing of [the Sullivan and Cromwell 

Attorney] earlier in the evening. In addition, MFGI representatives updated the participants 

on the ongoing portfolio liquidation. 

Around 11 pm the [HQ DCR Senior Supervisory Attorney] notified Ananda 

Radhakrishnan, Dan Berkovitz, [HQ DCR Deputy Director], [OGC Attorney 1], an 

attorney in OGC charged with bankruptcy duties (the OGC Attorney), Gary Barnett, and [OGC 

Deputy] that, based on information received from the Chairman, the holding company would 

likely file for bankruptcy on Sunday, and there might also be a SIPC proceeding with respect to 

MFGI.

111 The OGC Attorney later replied he would be available on Sunday.112 Later still, 

MFGI arranged a conference call for the next day to begin at 10 am to discuss bankruptcy 

contingency plans.113 

Sunday, October 30

On October 30, status calls among CFTC employees began around 7 am EST. Gary 

Barnett let the [HQ DSIO Senior Supervisory Auditor] and the [HQ DSIO 

 111 Email dated October 29, 11 pm (EST). Author: the [HQ DCR Senior Supervisory Attorney] . 

Recipient: Ananda Radhakrishnan. Cc: Dan Berkovitz, [HQ DCR Deputy Director], the OGC Attorney, Gary 

Barnett, [OGC Deputy]. 

112 Email dated October 30, 1:49 am (EST). Author: the OGC Attorney. Recipient: the [HQ DCR Senior 

Supervisory Attorney] . Cc: Dan Berkovitz, [HQ DCR Deputy Director], Gary Barnett, [OGC Deputy].

113 Email dated October 30, 1:58 am (EST). Author: Laurie Ferber. Recipient: Gary Barnett. 
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Supervisory Auditor] know that there were multiple calls the night before, and that nothing 

was finalized with regard to a sale of MFGI, a bankruptcy petition for the holding company, or 

the outcome of portfolio auctions. Gary Barnett stated that MFGI personnel in Treasury could 

not confirm that funds had been deposited to increase the secured funds, but they promised an 

update that day.114 The [CH DSIO Audit Team Leader Supervisor] spoke with the [HQ 

DSIO Supervisory Auditor] on Sunday during the morning. 

During the morning of the 30th, Chairman Gensler learned that CFTC was still waiting 

for supporting documentation for the Friday cap, seg and secured balances, as well as 

documentation that the 30.7 funds had been increased to net liq levels on Friday, and 

documentation of the tri-party agreement with MF Securities. Chairman Gensler spoke with

[the Sullivan and Cromwell Attorney] and did not mince words regarding his concern 

about the level of cooperation from MFGI in these matters. 

Around 10 am Gary Barnett requested a post-meeting with Laurie Ferber following the 

previously scheduled conference call for that morning, to discuss “hard facts” and the requested 

cap, seg, and secured amounts (with documentation) for Friday, stating that the Chairman was 

requesting this information “and wants us to pursue it using all possible means.”115 At 10:47 am 

(EST) [MFGI Attorney 2]116 emailed Edith O’Brien and [MFGI Employee 3] as follows: 

“We must email the [CH DSIO Audit Team Leader Supervisor] at CFTC in 5 minutes”

and instruct whether the cap, seg, and secured numbers for October 28 will be provided by 

noon.

117 

Around noon (EST), [MFGI Attorney 2]let the [CH DSIO Audit Team Leader 

Supervisor] and others at CFTC know that 2 pm (EST) was the estimated time that Friday’s 

cap, seg, and secured numbers would be available because of a scheduled system test performed 

by FIA that delayed the receipt of data.118 MFGI employees understood that CFTC was giving 

them until 2 pm (EST) (or 1 pm CST) to supply the seg and secured numbers for close of 

business Friday.119 

 114 Email dated October 30, 7:12 am (EST). Author: Gary Barnett. Recipient: the [HQ DSIO Supervisory 

Auditor]. Cc: the [HQ DSIO Senior Supervisory Auditor]. 

115 Email dated October 30, 10:00 am (EST). Author: Gary Barnett. Recipient: Laurie Ferber. 

116 [MFGI Attorney 2] was a former Director for the CFTC Division of Enforcement (1983-1995). See, 

Crawford, W. (1995, Mar. 9), CFTC Chief Reorganizes Enforcement Staff, Chicago Tribune. (Available at: 

http://articles.chicagotribune.com/1995-03-09/business/9503090162_1_cftc-mary-l-schapiro-enforcement). 

117 Email dated October 30, 10:47 am (EST). Author: [MFGI Attorney 2]. Recipients: Edith O’Brien and 

[MFGI Employee 3].

118 Email dated October 30, 12:11 pm (EST). Author: [MFGI Attorney 2]. Recipient: the [CH DSIO Audit 

Team Leader Supervisor]. Cc: the [HQ DCR Senior Supervisory Attorney], Gary Barnett, and Laurie 

Ferber. 

119 Email dated October 30, 12:05 pm (CST). Author: [MFGI Employee 3]. Recipients: [MFGI Employee 5]

and [MFGI Accountant 1]. 
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Throughout the day, CFTC staff deployed to the MFGI Offices in New York120 and 

Chicago, and to CFTC’s Offices: 

• At around 11 am (CST) Mr. Barnett and Mr. Radhakrishnan determined during a 

conference call with staff that [CH DSIO Audit Team Leader 

Supervisor] should go to the MFGI Chicago Office. She arrived at MFGI

around 1 or 1:30 (CST). 

• The [HQ DSIO Supervisory Auditor] called [NY DSIO Audit Team 

Leader 2] around noon, EST time, and who in turn called [NY DSIO Audit 

Team Leader 1] . The New York Team Leaders got to the MFGI Offices in 

New York about 2:00-2:30 pm (EST).

121 

• The [CH DSIO Audit Team Leader Supervisor] called the [CH DSIO 

Audit Team Leader]; the [CH DSIO Audit Team Leader] arrived at the 

Chicago MFGI Office around 3 pm (CST). 

• The Chairman called [NY Enforcement Senior Supervisory Attorney]

at 1 pm (EST), but did not immediately reach him. The [NY Enforcement 

Senior Supervisory Attorney] arrived at the CFTC NY Offices around 

3:30 to 4 pm (EST). 

• The [HQ DCR Senior Supervisory Attorney] was at his desk at CFTC 

headquarters by 10 am (EST). 

• The OGC Attorney received a call at 10 am (EST) and went to CFTC 

headquarters (with luggage). 

CME arrived at MFGI in Chicago around 2 pm (CST).

122 CME staff arrived at MFGI in 

NY after 3 pm (EST). 123 CFTC staff saw SEC staff on site in New York. 

When she arrived, MFGI Chicago staff told the [CH DSIO Audit Team Leader 

Supervisor] they were not aware of the 1 pm (CST) deadline to provide Friday’s cap, seg and 

 120 We presume NY CFTC staff trekked in on Sunday not without some difficulty. On October 30, 2011, “millions 

of people across the Northeast were without power after an unusual storm dumped record amounts of snow.” See, 

Maslin, S. (2011, Oct. 30), Storm Leaves More Than 2 Million Without Power, The New York Times. (Available at: 

http://www.nytimes.com/2011/10/31/us/storm-leaves-more-than-2-million-withoutpower.html?pagewanted=all&_r=0#

121 Email dated Sunday October 30, 1:23 pm (EST). Author: [NY DSIO Audit Team Leader 2] . Recipients:

[MFGI Attorney 2], the [HQ DCR Senior Supervisory Attorney] , Edith O’Brien. Cc: the [CH DSIO 

Audit Team Leader Supervisor], Gary Barnett, the [HQ DSIO Supervisory Auditor], [NY DSIO 

Audit Team Leader 1]. 

122 CME Timeline, supra fn. 5, at page 14 of the .pdf.

123 Id.
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secured numbers, and that they would have them by 2 pm (CST). This assertion of course was 

inaccurate, as Chicago MFGI employees had previously acknowledged the deadline.124 MFGI

missed the 2 pm (EST) deadline to provide the cap, seg, and secured numbers for Friday, and 

MFGI assured the [HQ DCR Senior Supervisory Attorney] that the information would 

be provided at 3 pm (EST). Around 2 pm (CST), [MFGI Accountant 1]indicated to the [CH 

DSIO Audit Team Leader Supervisor] there was a potential seg problem.125 

About 2:25 pm (CST), the [CH DSIO Audit Team Leader Supervisor]

documented the missed deadline and asked MFGI to “[p]lease provide a firm time when the 

segregated, secured and capital computations for Friday, October 28th ... will be provided.”126 At 

3:40 (EST) the [HQ DCR Senior Supervisory Attorney] informed MFGI that “the lack 

of data is driving adverse inferences” and stressed CFTC’s need to receive the information and 

underlying support immediately.127 At 2:46 pm (CST) [MFGI Employee 3] of MFGI

promised to send the preliminary daily net capital for Friday “shortly,”128 and at 3 pm (CST)

MFGI gave the [CH DSIO Audit Team Leader Supervisor] net cap figures for Friday 

and they were fine. 129 At 4:16 pm (EST) Laurie Ferber apologized for not contacting the [HQ 

DCR Senior Supervisory Attorney] sooner, promised an update “soon,” and stated that 

the [CH DSIO Audit Team Leader Supervisor] is working with MFGI and progress was 

being made.130 

In New York, the New York Team Leaders first spoke with the [CH DSIO Audit 

Team Leader Supervisor] and the [HQ DSIO Supervisory Auditor], and learned that 

Chicago staff was working on getting the cap, seg and secured numbers for Friday and 

documentation. And initially, around 2:30 to 3 pm (EST), they asked for the cap, seg and 

 124 See fn. 119 and accompanying text. 

125 The CME timeline differs; it asserts that the [CH DSIO Audit Team Leader Supervisor] let CME know 

at 2pm that she had reviewed a draft of the October 28 cap, seg, and secured statement and it showed a deficiency in 

segregated funds. (CME timeline, supra n.4, at page 14 of the .pdf.)

126 Email dated Sunday, October 30, 2:35 pm (CST). Author: the [CH DSIO Audit Team Leader 

Supervisor]. Recipients: [MFGI Attorney 2] and Edith O’Brien. Cc: Gary Barnett, the [HQ DSIO 

Supervisory Auditor], Ananda Radhakrishnan, and the [HQ DCR Senior Supervisory Attorney]. 

127 Email dated October 30, 3:40 pm (EST). Author: the [HQ DCR Senior Supervisory Attorney]. 

Recipients: [MFGI Attorney 2], Edith O’Brien, [MFGI Employee 3], and Laurie Ferber. Cc: Gary Barnett, 

the [HQ DSIO Supervisory Auditor], Ananda Radhakrishnan, and the [CH DSIO Audit Team Leader 

Supervisor]. 

128 Email dated October 30, 2:46 pm (CST). Author: [MFGI Employee 3]. Recipients: the [CH DSIO Audit 

Team Leader Supervisor], [MFGI Attorney 2], and Edith O’Brien. Cc: Gary Barnett, the [HQ DSIO 

Supervisory Auditor], Ananda Radhakrishnan, the [HQ DCR Senior Supervisory Attorney] . 

129 Email dated October 30, 2:47 pm (CST) (with attachment). Author: [MFGI Accountant 1]. Recipients: the 

[CH DSIO Audit Team Leader Supervisor], the [CH DSIO Audit Team Leader], [CME Auditor 2]. 

Cc: [MFGI Employee 5], [MFGI Employee 3], [MFGI Employee 15]. 

130 Email dated October 30, 4:16 pm (EST). Author: Laurie Ferber. Recipients: the [HQ DCR Senior 

Supervisory Attorney], [MFGI Attorney 2], and Edith O’Brien. Cc: Gary Barnett, the [HQ DSIO 

Supervisory Auditor], Ananda Radhakrishnan, and the [CH DSIO Audit Team Leader Supervisor].
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secured statements for Friday in New York. About an hour later [MFGI Employee 2] of 

MFGI spoke with them; although they saw Corzine and Bradley Abelow, [MFGI Employee 2]

was their contact throughout the day. They reviewed the outline for a sales agreement and other 

documents throughout the day and into the evening. The [NY Enforcement Senior 

Supervisory Attorney] arrived at the CFTC NY Office around 3:30 or 4 pm (EST). The 

[NY Enforcement Senior Supervisory Attorney] later spoke with the Chairman, who 

said he had wanted him to “show his badge” and get the documents CFTC was requesting.131 

Around 3:50 pm, CST, the [CH DSIO Audit Team Leader Supervisor]

forwarded the 4 pm (CST) CME conference call invite to the New York Team Leaders and the 

[CH DSIO Audit Team Leader], and invited them to join an upcoming conference call,

132

and about 4:00 pm (CST), CME began a conference call with multiple participants on only 10 

minutes’ notice. Invitees to this call included representatives from CME, SEC, the Kansas City 

Board of Trade, the Intercontinental Exchange, the NASDAQ, the OCC, FINRA, CCX, and 

other entities, and also the [HQ DSIO Senior Supervisory Auditor], the [HQ DSIO 

Supervisory Auditor] and the [CH DSIO Audit Team Leader Supervisor].

133 The 

Chairman participated in this call at the request of the SEC Chairman, and expressed concern 

about the level of cooperation from MF Global regarding document requests from CFTC, as well 

as the need to document MFGI’s increase in secured funds on Friday to satisfy the net liq 

method, and the tri-party repo with MF Securities. This conference call continued all night long, 

and the phone line remained open until 9 am on Monday, October 31. Regulators from time to 

time discussed regulatory matters privately, asking the non-regulator participants to hang up 

during these discussions. 

Around 4:20 pm (CST) on Sunday, October 30, the [CH DSIO Audit Team Leader 

Supervisor] let MFGI and CFTC officials know that MFGI was continuing to “reconcile seg 

and secure numbers” and that “final numbers have not been provided.” In addition, CFTC staff 

on site in Chicago were working with MFGI’s Treasury group to review asset balances and 

locations, and would ask for the preliminary seg and secured numbers “and continue to work 

with MF Global staff to identify discrepancies.”134 [NY DSIO Audit Team Leader 2]

 131 There is some disagreement whether this conversation took place on Sunday or Monday. Other CFTC staff also 

mentioned the Chairman told people to show their badge on Sunday. 

132 Email dated October 30, 4:51 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: the New York Team Leaders and the [CH DSIO Audit Team Leader]. 

133 Email dated October 30, 3:49 pm (CST). Author [CME Auditor 2]. Recipients: [24 addressees at 

CME, SEC, the Kansas City Board of Trade, the Intercontinental Exchange, the NASDAQ, 

the OCC, FINRA, CCX, and other entities], the [HQ DSIO Senior Supervisory Auditor]; the 

[HQ DSIO Supervisory Auditor]; the [CH DSIO Audit Team Leader Supervisor]; [SEC Senior 

Auditor 4]; [SEC Employee 3]; [SEC Senior Auditor 1]; [SEC Senior Auditor 5]; [SEC 

Senior Auditor 2]; [SEC Employee 5]; [CME Manager 1]. See also, CME timeline, supra fn. 5, at page 

14 of the .pdf.

134 Email dated October 30, 4:20 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: Laurie Ferber, the [HQ DCR Senior Supervisory Attorney], [MFGI Attorney 2], Edith 

O’Brien, and [MFGI Employee 3]. Cc: Gary Barnett, the [HQ DSIO Supervisory Auditor], Ananda 

Radhakrishnan, and the [CH DSIO Audit Team Leader]. 
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asked if there was anyone in the MFGI New York Office who could help the process,135 and the 

[CH DSIO Audit Team Leader Supervisor] responded that MFGI was “huddling now” 

and she would let him know if there was a “New York connection.”136 

At 6:04 pm, CST, the [CH DSIO Audit Team Leader Supervisor] updated CFTC 

with the preliminary secured calculation, which showed excess secured funds under the alt and 

the net liq methods; however, the preliminary segregated calculation showed a $900 million 

deficit in seg funds, with MFGI reviewing bank statements and manual entries to identify data 

entry errors. The [CH DSIO Audit Team Leader Supervisor] furnished this 

information to the [HQ DCR Senior Supervisory Attorney] , Gary Barnett, Ananda 

Radhakrishnan, the [HQ DSIO Supervisory Auditor], the [CH DSIO Audit Team 

Leader], and the New York Team Leaders.137 The [CH DSIO Audit Team Leader 

Supervisor] had previously shared this information with the [HQ DSIO Supervisory 

Auditor] by phone around 5 pm, CST. 

Back in New York, CFTC staff told us that at some point during the day, visiting CFTC 

staff became incensed at the delay for cap, seg, and secured numbers, with a New York Team 

Leader strongly demanding to see the numbers now. After the New York staff learned of the 

shortfall in customer seg in the preliminary numbers for Friday at around 7 pm (EST), [MFGI 

Employee 2] of MFGI assured in a conference call that the shortfall was due to errors in 

bookkeeping which was not current with all updates, and assured that the numbers would be 

reconciled with no seg deficiency. CFTC staff told us that the [CH DSIO Audit Team 

Leader Supervisor] challenged that assertion, telling [MFGI Employee 2] in New York 

that MFGI staff in Chicago were panicked because they did not know what was causing the 

shortfall, and stating she did not think it was a bookkeeping error. [MFGI Employee 2] was 

nonplussed to hear this and left the room, stating he would find out what the problem was. 

[MFGI Employee 2] never came back, so the New York Team Leaders went to look for him. 

They found him with Corzine and others, and [MFGI Employee 2] again told them that MFGI

was working to reconcile the segregation calculation for Friday. [MFGI Employee 2] never 

came back to update the New York Team Leaders on the seg shortfall. 

CME reported that sometime after 7 pm (CST), the [CH DSIO Audit Team Leader]

gave the disc she received from MFGI on Friday to representatives of CME, and that Ananda 

Radhakrishnan spoke with CME.138 

 135 Email dated October 30, 4:25 pm (CST). Author: [NY DSIO Audit Team Leader 2]. Recipients: the [CH 

DSIO Audit Team Leader Supervisor], [NY DSIO Audit Team Leader 1], the [CH DSIO Audit 

Team Leader]. 

136 Email dated October 30, 4:30 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: the New York Team Leaders. Cc: the [CH DSIO Audit Team Leader].

137 Email dated October 30, 6:04 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: the [HQ DCR Senior Supervisory Attorney] , Gary Barnett, and Ananda Radhakrishnan. Cc: 

the [HQ DSIO Supervisory Auditor] and the [CH DSIO Audit Team Leader]. 

138 CME Timeline, supra fn. 5, at page 15 of the .pdf.
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Around 8 pm (EST), the Chairman updated Commissioners Sommers, Chilton, O’Malia, 

and Wetjen. Chairman Gensler informed that MFGI was working with Interactive Brokers 

Group “to transfer all of MF Global customer positions and collateral a.s.a.p.” He stated: “If 

matters develop as MF is now indicating, staff will put together an email memo for each of you 

on further deal details as well as a summary of a staff no-action letter that may be needed for the 

bulk transfer of accounts.”139 In response to a reply from Commissioner Chilton, Chairman 

Gensler further explained that the Commissioners would need to issue an “absent objection” that 

DSIO will be giving a no-action letter to MF on their bulk transfer of customer positions and 

collateral without the 10 day notice in CFTC rules.140 

At 9 pm (EST), the regulators gave Laurie Ferber a list of six requirements necessary in 

order to obtain the regulators’ approval of any sale of the FCM/broker-dealer. Chairman Gensler 

reviewed a draft sale agreement during the evening and made suggestions pertaining to matters 

of concern to CFTC pertaining to the transfer of customer funds and the “topping up” of the 

secured funds to the net liq amount if necessary. MFGI prepared a press release to announce the 

pending sale. 

The [CH DSIO Audit Team Leader Supervisor] remained at MF Global and 

continued to review bank statements into the evening.141 Eventually the [CH DSIO Audit 

Team Leader Supervisor] told the CFTC employees in New York that she believed the 

shortfall in customer seg was real. Accounts differ on when the New York staff went home for 

the night; the [HQ DSIO Supervisory Auditor] approved their departure sometime 

between 9 and 11 pm (EST). The [HQ DSIO Supervisory Auditor] approved the [CH 

DSIO Audit Team Leader Supervisor] and staff to leave the Chicago MFGI Offices 

around midnight (CST). 

Back in Washington, the [HQ DCR Senior Supervisory Attorney] during the day 

worked on issues attendant to customer account transfers. He participated in conference calls, 

and worked on no-action relief under Commission Regulation 1.65 with Gary Barnett and 

Ananda Radhakrishnan. He was aware of the preliminary seg shortfall of over $900 million, but 

believed it was a reconciliation problem.

The OGC Attorney also worked on document review. He kept Dan Berkovitz and [OGC 

Deputy] in the loop. He did not know of the shortfall Sunday evening, and learned of the 

shortfall around 2:00 am (EST) on October 31. 

 139 Email dated October 30, 7:52 pm (EST). Author: Chairman Gensler. Recipients: Commissioner Sommers, 

Commissioner Chilton, Commissioner O’Malia, and Commissioner Wetjen. Cc: Ananda Radhakrishnan, Gary 

Barnett, the [HQ DCR Senior Supervisory Attorney] , Dan Berkovitz, the [HQ DSIO Supervisory 

Auditor], and the OGC Attorney. 

140 Email dated October 30, 8:31 pm (EST). Author: Chairman Gensler. Recipient: Commissioner Chilton. Under 

CFTC Rule 1.65, 17 C.F.R. § 1.65, an FCM must give customers and the Commission notice prior to transferring 

accounts. This requirement may be waived. 

141 Email dated October 30, 2011, 9:38 pm (CST). Author: [MFGI Employee 20]. Recipient: the [CH DSIO 

Audit Team Leader Supervisor]. Cc: Edith O’Brien.
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Gary Barnett worked on the purchase agreement, the no-action relief to permit the 

transfer of customer accounts, and other drafts. He was aware that the preliminary seg numbers 

for Friday October 30, showed a shortfall of over $900 million, and believed MFGI was treating 

it as a reconciliation problem. Ananda Radhakrishnan remained in the loop, communicating 

with regulators, MFGI, and CME, and was aware of the email from the [CH DSIO Audit

Team Leader Supervisor] indicating MFGI was treating a preliminary $900 million seg 

shortfall as a reconciliation error Sunday evening. He worked on issues pertaining to account 

transfers. 

Around 11 pm (EST) on Sunday, Chairman Gensler spoke with representatives of MF 

Global and the company currently negotiating to purchase MFGI, Interactive Brokers, regarding 

the six regulator requirements and got confirmation that Interactive Brokers was on board with 

the six requirements. The CFO of Interactive was on the open phone line during this discussion, 

as well as the CFTC General Counsel, and representatives of the SEC and FSA. Chairman 

Gensler exited the conference call after this conversation. Chairman Gensler wrote a note of 

thanks to Commission staff working over the weekend on the MFGI matter, and wrote, “Feel 

free to wake me if there is anything I can be helpful on as the night develops further.”142

At midnight (EST) review of draft documents pertaining to the anticipated sale of MFGI

was ongoing among CFTC staff and management.143 

Monday, October 31

CFTC employees remained in communication with MFGI, CME, and the other regulators 

overnight. CME reports that the [HQ DSIO Supervisory Auditor] was in communication 

with CME at 2 a.m. (CST), discussing the possibility of permitting MFGI to transfer funds into 

segregation.144 

CME’s timeline informs that MFGI continued to claim they were finding possible errors 

in the seg reconciliation up until midnight (CST), and between midnight and 1 am the sale with 

Interactive Brokers was moving toward completion with regulatory signoffs. CME further 

reports that MFGI was claiming, even if the seg deficiency were real, MFGI may have sufficient 

funds to top up segregated funds. In addition, Interactive Brokers and MFGI were “aligned on 

 142 Email dated October 30, 10:54 pm (EST). Author: Chairman Gensler. Recipients: Ananda Radhakrishnan, 

Gary Barnett, the [HQ DCR Senior Supervisory Attorney] , the [HQ DSIO Supervisory Auditor], and 

the OGC Attorney. Cc: Commissioner Sommers, Commissioner Chilton, Commissioner O’Malia, Commissioner 

Wetjen, and Dan Berkovitz. 

143 Email string dated October 30, 11:12 pm (EST). Author: [SEC Senior Auditor 3] (attaching draft 

purchase agreement). Recipients: Bob Cook (SEC), [SEC Employee 3], [SEC Senior Auditor 2], [SEC 

Employee 4], and the [HQ DCR Senior Supervisory Attorney] (who forwarded it to Gary Gensler, 

Ananda Radhakrishnan, Gary Barnett, the [HQ DSIO Senior Auditor], the [CH DSIO Audit Team Leader 

Supervisor], [NY DSIO Audit Team Leader 2], and the OGC Attorney. Further email among the CFTC 

recipients continued to at least 1 am.

144 CME Timeline, supra fn. 5, at page 16 of the .pdf.
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the importance of the transfer occurring promptly.”145 CFTC employees were aware that time 

was of the essence; not only did MFGI have to show seg and secured compliance (and 

continuing net capital compliance as liquidity continued to dry up) in order to permit customer 

trading on Monday, it had to show seg and net capital compliance in order to open in London 

which was 4 hours earlier (due to daylight savings). 

At 2:30 am (EST) Chairman Gensler got a call from the [HQ DCR Senior 

Supervisory Attorney], who asked him to join the conference call again. Participating 

were Mr. Steenkamp, Ms. Ferber, and other MF Global executives, CFTC officials and others. 

The Chairman learned of the $900 million shortfall in customer seg funds, and MF Global 

executives explained what they knew at that time regarding the origins of the shortfall, but also 

continued to suggest that they should be able to find the error, and that funds might be 

transferred into the seg accounts sufficient to permit MFGI to open and to save the deal with 

Interactive Brokers. Chairman Schapiro joined the call around 4 am (EST). Around 4 am (EST)

Kimberly Taylor of CME joined the conversation. 146 Sometime after 4:30 am (EST) the deal 

with Interactive Brokers collapsed.147 Between 5 and 6 am (EST) the decision was made that a 

SIPC proceeding would be filed. 

Around 6:00 am (EST), the Chairman sent an email to the other Commissioners, letting 

them know that a deficiency in customer segregated funds had been discovered and that the deal 

with Interactive Brokers had fallen through.148 He did not disclose the size of the deficiency. 

[CH DCR Supervisory Risk Analyst]149 gave a status update on public reports of MF 

Global to CFTC staff and management, and Ananda Radhakrishnan let staff and management 

know that there might be a SIPC filing.150 The [HQ DSIO Supervisory Auditor]

reminded CFTC staff and management that SIPC information was not public.151 At 6:00 am 

(EST), the [HQ DCR Senior Supervisory Attorney] and the OGC Attorney were on a 

 145 Id. 

146 CME Timeline, supra fn. 5, at page 17 of the .pdf.

147 CME Timeline, supra fn. 5, at page 17 of the .pdf.

148 Email dated October 31, 5:58 am (EST). Author: Chairman Gensler. Recipients: Commission Sommers, 

Commission Chilton, Commissioner O’Malia, Commissioner O’Malia, and the OGC Attorney. Cc: Ananda 

Radhakrishnan, Gary Barnett, the [HQ DCR Senior Supervisory Attorney] , Dan Berkovitz, [DCR 

Supervisory Attorney], [three attorneys in the Chairman’s Office], and Gary Barnett.

149 [CH DCR Supervisory Risk Analyst] is [a Supervisory Risk Analyst].

150 Email dated October 31, 6:00 am and 6:12 am (EST). Authors: [CH DCR Supervisory Risk Analyst], 

Ananda Radhakrishnan. Recipients: the [HQ DSIO Supervisory Auditor], Ananda Radhakrishnan, [HQ DCR 

Deputy Director], the [HQ DCR Senior Supervisory Attorney], the [HQ DSIO Senior Supervisory 

Auditor], the [CH DSIO Audit Team Leader Supervisor], Gary Barnett, [HQ DCR Supervisory 

Attorney], and [Chairman’s Office Attorney 1]. 

151 Email dated October 31, 6:18 am (EST). Author: [HQ DSIO Supervisory Auditor]. Recipients: [CH DCR 

Supervisory Risk Analyst], [HQ DSIO Supervisory Auditor], Ananda Radhakrishnan, [HQ DCR 

Deputy Director], the [HQ DCR Senior Supervisory Attorney], the [HQ DSIO Senior Supervisory 

Auditor], the [CH DSIO Audit Team Leader Supervisor], Gary Barnett, [HQ DCR Supervisory 

Attorney], [Chairman’s Office Attorney 1]. 
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train to New York City in order to participate in the bankruptcy that would likely be filed that 

day. At 7:00 am (EST), the Chairman went to his office at CFTC headquarters. He found a 

message when he arrived that Mr. Flowers had called and wanted to speak with him. He called 

[the Sullivan and Cromwell Attorney] and spoke briefly and for the last time, then 

spoke with Mr. Flowers and Mr. Steenkamp, [MFGI Employee 2], Mr. Goldfield, and 

others.152

CME reports that MFGI continued to identify assets that it could move into segregation; 

however, its efforts were not successful and the deal with Interactive Brokers collapsed 

sometime before 6:45 am (CST).

153 

Shortly after 8:00 am EST, the New York Team Leaders returned to the MFGI Offices in 

New York, and notified the [CH DSIO Audit Team Leader Supervisor] of their 

arrival.154 The [CH DSIO Audit Team Leader Supervisor] let them know she would 

arrive at the MFGI offices in Chicago in about an hour.

155 Around 9:00 am EST, the [HQ DCR 

Senior Supervisory Attorney]and the OGC Attorney arrived at the CFTC NY Offices. 

The [NY Enforcement Senior Supervisory Attorney] called Enforcement trial 

attorney [NY Enforcement Staff Attorney], and he arrived at the New York Office 

around 9 am EST. The [CH DSIO Audit Team Leader Supervisor] arrived at the MF 

Global Offices in Chicago around 9:00 am CST, after finishing some business at the CFTC 

Chicago Office.

156 She joined the [CH DSIO Audit Team Leader] and two staff auditors, 

who had arrived on site at MFGI earlier that morning. 

The Trustee reported that, on Monday around 11 am, CST:

MFGI in-house counsel [MFGI Attorney 1] informed Ms. Ferber, “I’m here 

in Edith O’Brien’s office with Serwinski, CFTC and the CME. No wires out of 

any sort from MF firms. We are ordered to move as much from the BD to the 

FCM immediately, without regard to CFTC 1.25.”157

The Staff Report of the House Financial Services Investigative Subcommittee on MF 

Global stated: 

 152 Mr. Flowers and Mr. Goldfield are discussed in detail at pages 53 - 54, and accompanying footnotes.

153 CME Timeline, supra fn. 5, at page 3-4 of the .pdf.

154 Email dated October 31, 8:13 am (EST). Author: [NY DSIO Audit Team Leader 2] . Recipients: the [HQ 

DSIO Supervisory Auditor] and the [NY DSIO Audit Team Leader Supervisor]. Cc: [NY DSIO 

Audit Team Leader 1] , the [CH DSIO Audit Team Leader Supervisor], the [CH DSIO Audit Team 

Leader], and the [HQ DSIO Senior Supervisory Auditor]. 

155 Email dated Monday October 31, 7:17 am (CST). Author: the [CH DSIO Audit Team Leader 

Supervisor]. Recipient: [NY DSIO Audit Team Leader 2].

156 Email dated Monday October 31, 7:17 am (CST). Author: the [CH DSIO Audit Team Leader 

Supervisor]. Recipient: [NY DSIO Audit Team Leader 2].

157 Trustee’s report page 120. 
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Before the markets opened on Monday morning, Serwinski sought to identify 

assets that MFGI could deposit in the company’s customer segregated accounts in 

order to mitigate any shortfall. Among other assets, Serwinski identified 

approximately $220 million in excess company funds deposited in a reserve 

account, which the company maintained for its securities customers. Though the 

SEC had expressed concern to MF Global about the calculation of excess funds in 

the reserve account and cautioned the company against transferring these funds, 

MFGI transferred the full amount of the perceived excess to its segregated FCM 

customer accounts.158

The Staff Report stated that “the director of the SEC’s Division of Trading and Markets 

related that an SEC staff member had heard from MF Global’s General Counsel, Laurie Ferber, 

that the CFTC had pressured MF Global to make the transfer,” and this was “unacceptable” to 

the SEC Chairman.159 The Staff Report stated that Ms. Serwinski recalled that no one 

communicated to her an instruction or caution from regulators that MF Global not transfer excess 

funds from the securities customer account.160 

In OIG interviews, CFTC staff stated that overnight and into the morning of Monday 

October 31, MFGI was attempting to locate funds that could be moved into customer seg. While 

staff admitted that they wanted all funds possible to be deposited to customer seg, they denied 

instructing or pressuring MFGI to move funds from broker-dealer regulated customer accounts to 

FCM customer seg. 

Around 11 am EST, [Chairman’s Office Attorney 1] emailed David Meister, 

Director of Enforcement, and the [NY Enforcement Senior Supervisory Attorney],

and requested “a couple guys” to back up CFTC staff at the MFGI Offices in New York and 

Chicago.161 [CH Enforcement Supervisory Attorney 1] in the CFTC Chicago Office,

sent a Chief Trial Attorney and a Chicago Enforcement investigator.162 

Around 11 am or noon, EST, the [NY Enforcement Senior Supervisory 

Attorney] sent trial attorney [NY Enforcement Staff Attorney], who was already on 

site at CFTC, to the MF Global Office in New York. [NY Enforcement Staff 

Attorney]was to deliver a document preservation letter to MFGI and to be on site as eyes and 

 158 House Staff Report page 71.

159 House Staff Report at page 72.

160 House Staff Report at page 71, fn. 430.

161 Email dated Monday October 31, 10:48 am (EST). Author: [Chairman’s Office Attorney 1]. 

Recipients: David Meister and the [NY Enforcement Senior Supervisory Attorney]. David Meister 

looped in [CH Enforcement Supervisory Attorney 1] and [HQ Enforcement Deputy Director]. [CH 

Enforcement Supervisory Attorney 1] looped in [CH Enforcement Senior Supervisory 

Attorney]. 

162 Email dated Monday October 31, 10:07 am (CST). The Chief Trial Attorney had 24 years CFTC experience and 

the investigator had two years with CFTC. 
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ears. When he arrived, [NY Enforcement Staff Attorney] was put in a windowless room 

with the New York Team Leaders, along with representatives of the SEC, CME, and CBOT, 

some of whom had been there all night. [NY Enforcement Staff Attorney] learned of 

the seg shortfall for the first time after he arrived. He delivered the letter and waited for updates 

in the room with the other regulators. 

Back in Washington, at noon EST the Commission held an emergency closed meeting on 

MFGI.

163 The participants sounded noticeably tired. The Chairman opened the meeting; he and 

Ananda Radhakrishnan dominated the meeting, each speaking more than any other speakers that 

day. The [HQ DCR Senior Supervisory Attorney] gave an overview of SIPC 

proceedings. The Commission voted an Order of Investigation to the Division of Enforcement 

prior to adjourning. The Chairman moved the vote and voted in favor of the Order of 

Investigation. 

The [CH DSIO Audit Team Leader Supervisor], participating by phone from the 

MFGI Chicago Office, continued to receive updates on deposits to customer seg by MFGI during 

the meeting. Just prior to the close of the 90 minute meeting, she stated that she had received 

word during the meeting that $222 million had been wired to customer seg. She did not discuss 

the source of the funds. She also said she heard the broker-dealer had identified $400 million in 

unencumbered assets that they planned to move into seg, and she said she was not sure whether 

the transfer would take place or that she “[didn’t] know whether there’s anything anybody can do 

to make it happen.” She said these additional funds would not cure the shortfall. 

Ananda Radhakrishnan explained: 

Ananda Radhakrishnan This is the free credit in the 15c3-3164 funds and the trouble 

is, the SEC doesn’t even track that computation.

[CH DSIO Audit Team Leader Supervisor] Right.

Ananda Radhakrishnan That’s the issue. I don’t blame them. Cause they’re 

saying, you know, there’s a certain amount of credit in the 

securities account, so –

Chairman Gensler Um, so what’s ... Mark, anything? Are there any other 

thoughts or –what’s that?

At this point, the Chairman remarked on Commissioner Wetjen’s eventful first week as a 

CFTC Commissioner, and the Commissioners and the Chairman thanked staff for the weekend’s 

work, discussed the possibility of future emergency meetings, and closed the meeting.

 163 The Sunshine Act notice for this meeting is here: 76 FR 68167 (November 3, 2011). Available at: 

http://www.gpo.gov/fdsys/pkg/FR-2011-11-03/pdf/2011-28607.pdf. 

16417 C.F.R. § 240.15c3-3.
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Back in New York, the Enforcement staff attorney on location at the MFGI New York 

Office learned that the trustee was headed to the court house to file the SIPC proceeding, and 

called the [NY Enforcement Senior Supervisory Attorney] and the [NY 

Enforcement Supervisory Attorney], with the news. The [NY Enforcement Senior 

Supervisory Attorney] immediately got the [HQ DCR Senior Supervisory 

Attorney] and they ran, literally, to the courthouse, which was four-tenths of a mile away 

from the CFTC NY Office. They were able to meet the trustee’s attorney at the courthouse 

before filing. 

The [HQ DCR Senior Supervisory Attorney] earlier that day had been in 

contact with SIPC because he wanted to know who would be the trustee and wanted to see the 

form of the order. The prior Friday he had emailed to SIPC the provisions that CFTC would 

need in any bankruptcy filing. The [HQ DCR Senior Supervisory Attorney] did not see 

the pleading until he met the SIPC attorney at the courthouse; the provisions were not there. The 

SIPC attorney permitted the [HQ DCR Senior Supervisory Attorney] to make the 

following changes in various paragraphs (noted in red below), to specify that the bankruptcy stay 

would not apply to CFTC:

VIII. ORDERED that the stays set forth above shall not apply to:

A. any suit, action or proceeding brought or to be brought by the United States Securities 

and Exchange Commission (“Commission”), the Commodity Futures Trading 

Commission (“CFTC”), or any self-regulatory organization of which the Defendant is 

now a member or was a member within the past six months; or provided that notice 

and prompt and periodic accountings are provided to the trustee; or

***

C. the exercise of a contractual right of any securities clearing agency to cause the 

liquidation of a securities contract as defined in 11 U.S.C. § 741(7) and the 

contractual right of any derivatives clearing organization (“DCO”) to cause the 

liquidation of a commodity contract as defined in 11 U.S.C. § 761(4); or

***

F. any setoff or liquidating transaction undertaken pursuant to the rules or bylaws of any 

securities clearing agency registered under section 17A(b) of the Securities Exchange 

Act of 1934, 15 U.S.C. § 78q-1(b), or any DCO registered under the Commodity

Exchange Act (“CEA”), or by any person acting under instructions from and on 

behalf of such a securities clearing agency or DCO; or

***

H. any transfer or delivery to a securities clearing agency or DCO by a bank or other 

depository, pursuant to instructions given by such clearing agency or DCO, of cash, 

securities, or other property of the Defendant held by such bank or depository subject 

to the instructions of such clearing agency or DCO and constituting a margin payment 

as defined in 11 U.S.C. § 741(5) or 11 U.S.C. § 761(15); or

I. the exercise of a contractual right, as such term is used in 11 U.S.C. § 555, in 

respect of (i) any extension of credit for the clearance or settlement of securities 

transactions or (ii) any margin loan, as such term is used in 11 U.S.C. § 741(7), by a 
U.S. Commodity Futures Trading Commission REDACTED

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41

securities clearing bank, or the exercise of a contractual right as such term is used in 

11 U.S.C. § 556 in respect of any extension of credit for the clearance or settlement of 

commodity contracts by a commodity broker as defined in 11 U.S.C. sec. 101. As 

used herein, “securities clearing bank” refers to any financial participant, as defined 

in 11 U.S.C. § 101(22A), that extends credit for the clearance or settlement of 

securities transactions to one or more Primary Government Securities Dealers 

designated as such by the Federal Reserve Bank of New York from time to time. 

In addition, the [HQ DCR Senior Supervisory Attorney] altered the proposed 

order to authorize MFGI to not only conduct its securities and commodity futures and options 

business, but also its swaps and securities-based swaps businesses as necessary and appropriate 

for the orderly transfer of customer accounts and related property.165 

In Chicago, CFTC staff spent the rest of the day requesting and reviewing bank 

statements, updating cap, seg and secured balances for the previous week, and updating CFTC 

management. The final email updating CFTC staff and management on MFGI cap, seg, and 

secured numbers was sent after 10 pm CST.

166 

Tuesday, November 1 – Thursday, November 3

On November 1, things were back to normal for the New York Team Leaders, who 

returned to the CFTC NY Office for their usual work day.167 The [CH DSIO Audit Team 

Leader Supervisor] and her team returned to MFGI’s Chicago office to continue reviewing 

records.168 

At 10 am on November 2, the Chairman called a second emergency closed Commission 

meeting to discuss MFGI.

169 This meeting lasted approximately 32 minutes. Ananda 

Radhakrishnan gave an update on the current state of seg balances at MF Global, stating that 

current estimates put the seg deficiency at $589 million or possibly $800 million. Mr. 

Radhakrishnan stated that the $589 million deficiency calculation included in existing seg a 

 165 The original filing, complete with the [HQ DCR Senior Supervisory Attorney]’s handwritten 

amendments, is here: http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/sipcvmfg103111.pdf. 

166 Email dated October 31, 10:16 pm (CST). Author the [CH DSIO Audit Team Leader Supervisor], 

recipients the [HQ DSIO Supervisory Auditor], the [HQ DCR Senior Supervisory Attorney], and 

Gary Barnett. Cc: the [CH DSIO Audit Team Leader]. At 7:17 am (CST) the next day, the [CH DSIO Audit 

Team Leader Supervisor] forwarded the update to the New York Team Leaders. 

167 Email dated November 1, 8:43 am (EST). Author: [NY DSIO Audit Team Leader 2]. Recipients: the [HQ 

DSIO Supervisory Auditor]. Cc: the [CH DSIO Audit Team Leader Supervisor], the [NY DSIO 

Audit Team Leader Supervisor], [NY DSIO Audit Team Leader 1].

168 Email dated November 1, 7:48 am (CST), author [CH DSIO Audit Team Leader Supervisor]. 

Recipients: [NY DSIO Audit Team Leader 2], and the [HQ DSIO Supervisory Auditor]. Cc: the [NY 

DSIO Audit Team Leader Supervisor], [NY DSIO Audit Team Leader 1], and the [CH DSIO Audit 

Team Leader]. 

169 64 FR 68429 (Nov. 4, 2011), available here: 

http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2011-28773a.pdf. 
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transfer of $220 million that took place on October 31 from a broker-dealer customer account. 

He said that these funds were believed to be available to transfer to the 4d seg account, but now 

MFGI cannot guarantee that the funds were available to transfer. Mr. Radhakrishnan said that he 

had been in contact with Robert Cook about this transfer, and said that if the $220 million 

properly should be subtracted from the seg balance existing at MFGI’s close of business, the seg 

deficit would stand at closer to $800 million rather than $589 million. The status of the $220 

million was not yet resolved. 

The rest of the discussion dealt with disclosure issues, specifically what information the 

Commissioners could currently include in public disclosures and discussions regarding both 

Enforcement matters and developments with the seg deficiency calculation as new information 

came to light. [HQ Enforcement Deputy Director] discussed disclosure issues of 

concern to Enforcement, but Enforcement activities were not discussed. The Chairman closed 

the meeting, noting that MF Global would next be discussed on November 4 at the regularly 

scheduled closed Commission meeting to discuss surveillance and Enforcement matters. 

Later on November 2, the [CH DSIO Audit Team Leader Supervisor] received 

an email from the SEC stating that $111 million of the $220 million transferred into customer 

seg on October 31 was moved in error; it had been taken from customer fund accounts on the 

broker-dealer side and represented customer funds, not firm excess.170 She immediately 

forwarded this information to the [HQ DSIO Supervisory Auditor] and the [CH DSIO 

Audit Team Leader].

171 The [HQ DSIO Supervisory Auditor] passed the news on to 

Gary Barnett, Ananda Radhakrishnan, and the [HQ DSIO Senior Supervisory Auditor], 

indicating they might get a call from Robert Cook of the SEC, furnishing the [CH DSIO Audit 

Team Leader Supervisor]’s contact information for fuller detail, and stating that it was 

possible that the entire $220 million was not excess 15c3-3 funds.172 Later in the day, the [CH 

DSIO Audit Team Leader Supervisor] sent the estimated cap, seg, and secured statement 

for MFGI as of November 1, showing a negative seg balance of $593,912,844. 

On Thursday, November 3, Gary Barnett forwarded the updated cap, seg, and secured 

statement showing a negative seg balance of $593,912,844 to the Chairman, and the Chairman 

asked him to come up for a meeting.173 Later on Gary Barnett, the [HQ DSIO Supervisory 

 170 Email dated November 2, 3:42 pm (EST). Author: [SEC employee 1]. Recipient: the [CH DSIO Audit 

Team Leader Supervisor]. Cc: [SEC employee 2]. 

171 Email dated November 2, 4:53 pm (CST). Author: the [CH DSIO Audit Team Leader Supervisor]. 

Recipients: the [HQ DSIO Supervisory Auditor] and the [CH DSIO Audit Team Leader].

172 Email dated November 2, 5:21 pm (EST). Author: the [HQ DSIO Supervisory Auditor]. Recipients: 

Gary Barnett, Ananda Radhakrishnan, the [CH DSIO Audit Team Leader Supervisor], and the [HQ DSIO 

Senior Supervisory Auditor]. 

173 Email dated November 3, 8:28 am (EST). Author: Gary Barnett. Recipients: Chairman Gensler, Ananda 

Radhakrishnan, and [Chairman’s Administrative Assistant].
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Auditor], and others prepared for a briefing with the Chairman anticipated for November 4 

that would include a timeline or chronology of CFTC’s activities relating to MFGI.

174 

The Chairman withdrew from participation in matters involving MFGI on November 3.

Friday, November 4 – Friday, November 11

On November 4, the Commission held its regularly scheduled closed Commission 

meeting to discuss surveillance and enforcement matters. Commissioner Chilton led the 

meeting, stating that the Chairman would join the meeting “at some point,” and that 

Commissioner Sommers was not attending. Chairman Gensler’s decision to withdraw from 

participation in matters involving MF Global was not mentioned. Our review of a recording of 

the meeting indicates the Chairman never joined this meeting. The Chairman’s decision to 

withdraw from participation was not mentioned. With regard to MFGI, there was a detailed 

discussion of MFGI’s proprietary positions at the close of business and an update on coordinated 

efforts to facilitate the transfer of MFGI customer positions to their new account homes. 

Enforcement matters were not discussed in any detail. 

On November 7, the Office of General Counsel issued a litigation hold notice to all 

CFTC employees identified as possessing information relevant to potential litigation involving 

MFGI, and giving specific instruction regarding the retention of information. The litigation hold 

notice included the Chairman.175 In addition, on November 7, the General Counsel let 

Commissioner Sommers know that steps were being taken to formalize her appointment and 

duties with regard to MF Global.176 

On November 8, the Chairman issued his statement of non-participation.177 On 

November 9, the Commission approved the appointment of Commissioner Sommers to oversee 

the Commission in matters pertaining to MF Global (Chairman Gensler not participating). On 

November 9, Commissioner Sommers conducted a closed meeting of the Commission to discuss 

matters relating to MF Global. During that meeting, status of the $220 million transfer of 

 174 Email dated November 3, 5:55 pm (EST). Author: Gary Barnett. Recipient: the [HQ DSIO Supervisory 

Auditor]. 

175 Here is the list: the New York Team Leaders, the [NY DSIO Audit Team Leader Supervisor], the [CH 

DSIO Audit Team Leader Supervisor], the [HQ DSIO Supervisory Auditor], the [CH DSIO Audit 

Team Leader], the [HQ DCR Senior Supervisory Attorney] , Gary Barnett, Ananda Radhakrishnan, the 

OGC Attorney, Gary Gensler, and Enforcement personnel who were consulted over the last weekend and on 

October 31. 

176 Email dated November 7, 10 am (EST). Author: Dan Berkovitz. Recipients: [Commissioner Sommers’ 

Attorney 1], David Meister, Ananda Radhakrishnan, and Gary Barnett. Cc: [Commissioner Sommers’ 

Attorney 2]. 

177 The Chairman’s Statement of Non-Participation apparently is not posted to the public CFTC website, but may be 

found on Senator Roberts’ website: http://www.roberts.senate.gov/public/?a=Files.Serve&File_id=3feb48b5-cb1c47bc-8bbb-5e2e0447750a (page 3 of the .pdf). 
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broker-dealer customer funds that took place on October 31 was discussed.178 The 

Commissioners asked to be refreshed on the details of this issue, and asked for status. The [HQ 

DSIO Senior Supervisory Auditor] explained that at present he believed that when the 

transfer was made, MF Global believed the funds represented firm excess in a broker-dealer 

15c3-3 customer account, but the SEC is confident that $110 million should not have been 

transferred, and review of the remaining transferred funds was ongoing. He stated that SEC staff 

and CFTC staff were on site at the firm, going through records. 

On November 11, the Commission announced Ms. Sommers’ appointment as Senior 

Commissioner with authority to exercise certain authorities of the Chairman with respect to MF 

Global.179 

The Chairman’s Use of Personal Email to Accomplish Official CFTC Business

Several CFTC employees mentioned in the course of our work for this review that the 

Chairman used his personal email to perform official business during the final week of MFGI. 

We decided to take a closer look. 

We are aware of no specific federal law criminalizing or prohibiting the use of personal 

email to conduct official business. CFTC email policy instructs, “[d]o not email or forward 

sensitive information to a personal email address or a personal device.”180 Nevertheless, the use 

of personal email to conduct official business raises a number of issues. The National Archives 

and Records Administration (NARA) has stated: 

44 U.S.C. § 3102 requires Federal agencies to provide effective controls over the 

creation, maintenance and use of records in the conduct of current business. 

Further, according to 36 C.F.R. § 1236.22(b), “Agencies that allow employees to 

send and receive official electronic mail messages using a system not operated by 

the agency must ensure that Federal records sent or received on such systems are 

preserved in an appropriate agency recordkeeping system.”181 

In addition to record retention issues, use of personal email to conduct official federal 

business can also involve other alleged wrongdoing, such as secret policy-making,182

concealment of improper communications,

183 and other potential misconduct.184

 178 The $220 million transfer is discussed or mentioned in the Trustee’s report at pages 119-120, 122 n.86, and 123. 

It is identified in Cash Transactions charts in the annex to the report as “BD – Reserve Cash 15C33.” The $220 

million is not identified as customer funds. 

179 The Commission’s notice is posted to the public CFTC website and may be found here: 

http://www.cftc.gov/PressRoom/PressReleases/pr6140-11. 

180 CFTC Policy: Email (February 2011).

181 NARA letter to Department of Energy, September 20, 2012. Available here: 

http://www.citizensforethics.org/page/-/PDFs/Legal/Letters/9-20-12_NARA_letter_to_DOE.pdf?nocdn=1. 

182 Bobby Jindal Aides Use Personal Email To Strategize On Medicaid Cuts, by Melinda DeSlatte, Associated Press, 

Dec. 10, 2012. http://bigstory.ap.org/article/top-jindal-aides-use-personal-email-strategize. 
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When we searched the MF Global database for a tally of the number of times the 

Chairman used his personal email address, we found 7,005 instances. This total – 7,005 –

included cc:’s, duplicates, and email copied repeatedly in an email chain. We learned the 

Chairman used his personal email at least beginning in 2010 (i.e., the earliest date in the 

database). We emphasize that the MF Global database did not contain all Agency email and 

therefore likely did not contain all personal email authored by the Chairman and related to 

official business. We therefore have not reviewed all of the Chairman’s personal email relating 

to official business; however, the MF Global database did include some apparently errant email 

not pertaining to MFGI, and some of the Chairman’s 7,005 personal email pertained to CFTC 

business but did not involve MFGI. 

We found that the Chairman used his official email addresses far more frequently, with 

the database indicating 74,409 email sent to or from the Chairman’s official email address 

(including duplicates, cc:’s, email chains, and email encountered in the MF Global database that 

had no relation to MFGI). Some email used both addresses for the Chairman. 

We narrowed down the 7,005 by honing in on email specifically addressing MFGI, and 

Senator Shelby’s issues, and reviewed hundreds of separate email entries in the database listing a 

personal email address for the Chairman as author or recipient. We looked for improper 

communications. 

We found no patterns among subject matter, recipients, or any other detail pertaining to 

the Chairman’s use of personal email. We found personal email used for both substantive 

discussion and administrative matters (such as scheduling meetings). Our review did not reveal 

personal email used to communicate or transmit proprietary or trade position or personal 

information.185 We encountered discrete conversations and drafts of official documents that we 

would presume CFTC would treat as privileged and confidential, but we found no indication that 

the Chairman disclosed privileged or confidential information to individuals outside the Agency 

or to Agency employees lacking a need to know. 

 183 Energy Program Staff Was Told Not to Use Personal E-mail, Carol D. Leonnig & Joe Stephens, Washington 

Post, section A, pg 2, August 15, 2012. http://articles.washingtonpost.com/2012-08-

14/politics/35490043_1_personal-e-mail-e-mails-email. (Federal officials were warned to avoid using personal 

email addresses in email containing official email addresses to avoid subpoena of personal email accounts, allegedly 

because it might lead to disclosure of personal email that was improper.)

184 EPA Official Quits Amid E-Mail Scrutiny, Juliet Eilperin, Washington Post, Section A, pg. 3, February 20, 2013. 

http://www.washingtonpost.com/national/health-science/epa-official-quits-amid-e-mailscrutiny/2013/02/19/2ee812a4-7af6-11e2-9a75-dab0201670da_story.html. (It is alleged that a former EPA 

administrator used a secret government email account for official business under an alias named after the family 

dog.) 

185 Section 8 of the Commodity Exchange Act, 7 U.S.C. § 12, provides (among other things): “[T]he Commission 

may not publish data and information that would separately disclose the business transactions or market positions of 

any person and trade secrets or names of customers: Provided further, that the Commission may withhold from 

public disclosure any data or information concerning or obtained in connection with any pending investigation of 

any person.”
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We found no indication that the Chairman was attempting to hide the use of his personal 

email from other CFTC employees in an attempt to conduct “secret” official business. The 

Chairman used his personal email account routinely to contact various officials within CFTC,

including the General Counsel and other Commissioners, all at their official CFTC email 

addresses.

186

Before we began our review, representatives of CFTC OGC and CFTC’s Office of Data 

Technology visited the Chairman’s home on two occasions in order to satisfy for themselves that 

they had retrieved all CFTC-related email from the Chairman’s personal computer equipment for 

record retention purposes. We have only reviewed email items that were included in the MFGI

database. We received no complaints regarding possible misuse of personal email by the 

Chairman to conduct official business until the demise of MFGI. 

We asked the Chairman why he did it. He told us he did not know how to access his 

work email from his personal computer at home and didn’t have a CFTC-issued laptop, so when 

he was at home he used his personal email for CFTC business. He also told us that he used his 

personal email to communicate with CFTC officials regarding his pending appointment before 

he was sworn in as Chairman (and therefore before he received his official email address); some 

CFTC officials continued using the personal email address afterwards out of force of habit. We 

asked him how he accessed his official email from his personal email accounts while he was at 

work. He told us he retrieved it from his personal smart phone, which he carried alongside his 

CFTC phone holding his official email. 

The Chairman told us he no longer uses his personal email to conduct official business. 

Occasionally an email pertaining to official CFTC business will arrive in his personal email 

account; he will ask the sender to use his official address. We note with approval the Agency’s 

efforts to obtain all personal email communications by the Chairman, as well as the change in 

email practices by the Chairman, though we note that no referral was made to our Office at the 

time. Because our review of hundreds of emails to or from the Chairman’s personal email 

address did not give us reason to suspect violations of criminal statutes, we made no referrals. 

The Chairman’s Recusal

An Analysis of Whether CFTC Chairman Gary Gensler’s Decision to Recuse Himself 

from Matters Relating to the MFGI Investigation is Consistent with the CFTC’s Official 

Recusal Policy

CFTC has no official recusal policy. While there is online ethics guidance for CFTC 

employees that includes links to applicable regulations and the OGE, as well as contact 

information for personalized counseling, there is nothing on the internal website for CFTC 

employees that addresses when an employee must recuse himself or herself from official 

business, or seek guidance in that regard. The General Counsel and the assistant Designated 

Agency Ethics Official both represented that CFTC complies with applicable regulations and 

 186 However, the Chairman did communicate with Mr. Goldfield with no other CFTC employee cc’d. See fn. 211

and accompanying text. 
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OGE guidance regarding recusals, but treats each situation on a case by case basis, and there is 

no official policy on recusals. 

During the final days of MFGI, the Chairman did not seek advice from the Designated 

Agency Ethics Official. The Chairman spoke with MFGI executives in New York on Saturday 

October 29, Sunday October 30, and Monday October 31. He was in frequent communication 

with CME, SEC, FINRA, NY Fed, and other entities. In these conversations, as previously 

discussed, the Chairman requested status information on an ongoing basis, and other 

information. The Chairman spoke separately with MFGI’s outside counsel. The Chairman 

updated Commissioners on MFGI status and solicited acquiescence with anticipated no-action 

relief that would waive the customer notice requirement for bulk transfer of MFGI accounts if 

MFGI were able to find a buyer for the firm. 

When the firm collapsed, the Chairman led an emergency closed meeting to update the 

Commissioners, made a motion to approve an Order of Investigation into MFGI, and voted in 

favor of the Order of Investigation. On November 2, the Commission participated in a hearing in 

the SIPC proceeding to permit the first bulk transfer of customer accounts; the Chairman was 

fully briefed following the hearing. Also on November 2, the Chairman again led a second 

emergency closed Commission meeting to discuss MFGI. 

Throughout, the Chairman remained well informed and led all Commission meetings

pertaining to MFGI. The Chairman was aware of MFGI’s investments of customer funds, as 

well as the proprietary trading strategies at the parent level, and understood the effect the ratings 

downgrade could have on the parent and MFGI. The Chairman continuously expressed concern 

and sought reassurance that customer seg and secured funds were documented at the firm. At no 

point did the Chairman, in any closed meeting, email, or otherwise, state that he believed he 

might be a distraction to the Commission’s work regarding MFGI. 

On November 3, the Chairman for the first time sought guidance regarding whether he 

should recuse himself from matters involving MFGI. The General Counsel and Designated 

Agency Ethics Official187 told him that he was not required to withdraw from participation in 

MFGI as a result of his prior relationship with Mr. Corzine.188 The Chairman decided to recuse 

himself notwithstanding the advice of the Office of General Counsel and Designated Agency 

Ethics Official. The General Counsel or Assistant Designated Agency Ethics Official advised 

that, if that were the Chairman’s decision, it would be more appropriate to term this course of 

 187 At CFTC, the General Counsel and the Designated Agency Ethics Official are the same person. See 76 FR 

33066, 33111 fn. 2 (June 7, 2011) (“As used in this subpart, ‘General Counsel’ refers to the General Counsel in his 

or her capacity as counselor for the Commission and designated agency ethics official for the Commission, and 

includes his or her designee and the alternate designated agency ethics official appointed by the agency head 

pursuant to 5 C.F.R. § 2638.202.”) (http://www.cftc.gov/LawRegulation/FederalRegister/ProposedRules/2011-

12270.)

188 The significance of an opinion from the Agency Designated Agency Official is indicated at section 2635.107(b) 

of the OGE regulations, 5 C.F.R. § 2635.107(b), which provides: “Disciplinary action for violating [the Standards 

of Ethical Conduct] or any supplemental agency regulations will not be taken against an employee who has engaged 

in conduct in good faith reliance upon the advice of an agency ethics official, provided that the employee, in seeking 

such advice, has made full disclosure of all relevant circumstances.” 
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action a decision not to participate rather than a recusal. The Office of General Counsel began to 

prepare a formal statement for use by the Chairman. 

On November 4, Senator Grassley issued the following statement:189 

The chairman of the U.S. Commodity Futures Trading Commission is supposed 

to look out for investors. MF Global’s case is a big collapse that requires a lot of 

work from the commission to try to figure out what went wrong and minimize 

further investor losses if possible. It’s hard to see how the commission chairman 

could be completely objective in looking out for wronged investors when he has 

such strong ties to the principal of the failed firm. It seems recusal would be the 

best outcome for investors.

Senator Grassley made his statement “in light of media reports outlining close, 

longstanding ties between Gensler and Corzine. Media reports say Gensler and Corzine ‘rose 

through the ranks’ together at Goldman Sachs Group, Inc. for 18 years and collaborated on 

Capitol Hill when Corzine was a senator and Gensler was a staffer.”190 It was reported that 

Representative Frank indicated recusal was not presently advisable; Representative Frank was 

quoted as saying, “Knowing somebody is way too broad a reason for recusal.”191

The Chairman publicly stated his reasons for determining to withdraw from participation 

on a few occasions. On November 8, the Chairman issued a Statement of Non-Participation.

192 

The Chairman stated that he would not participate “in any enforcement matter involving specific 

parties MF Global, MF Global Holdings, Ltd., MF Global, Inc., or J.C. Flowers & Co.” The 

Chairman did not describe the reasons for his decision not to participate, and did not describe his 

relationship to any of the entities listed. Furthermore, the Chairman did not state he would 

refrain from participation in any enforcement matter involving any officers, directors, or 

employees of the four listed entities; however, we presume they were included. The Chairman’s 

statement follows below: 

 189 Senator Grassley’s statement is available here: 

http://www.grassley.senate.gov/news/Article.cfm?customel_dataPageID_1502=37718.

190 Id.

191 David S. Hilzenrath and Peter Whoriskey, “Gensler-Corzine relationship complicates CFTC probe of MF 

Global,” The Washington Post, November 4, 2011 (available here: http://articles.washingtonpost.com/2011-11-

04/business/35281044_1_gary-gensler-cftc-probe-jon-s-corzine). 

192 See fn. 177. 
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On December 1, 2011, the Chairman testified before the Senate Committee on Agriculture, 

Nutrition, and Forestry and when asked why he chose to withdraw from participation on 

November 3, testified as follows:

I had conversations directly with the General Counsel and through my staff with 

the ethics officer and himself throughout those days and they had indicated that it 

was warranted for my involvement to stay participating. I indicated to the 

General Counsel on that Thursday [Nov. 3] that I thought that it could be a 

distraction to the very important work, of pursuing where was the cash, where 

was the money, get the money back, and any investigation or enforcement 

matter.193 

When questioned further, the Chairman testified:

Really as of that Thursday of the week, there’s been a transition from, uh, a 

registrant had gone into bankruptcy, and there was an ongoing investigative 

matter, and that Friday there was going to be an open [sic] surveillance meeting to 

discuss those matters, and I turned to General Counsel Berkowitz, and asked him 

what I needed to do, and he said you don’t need to do anything different, and I 

said, let me tell you that I think it could be a distraction to the very good work of 

the government. 194

On December 13, 2011, the General Counsel and Designated Agency Ethics Official 

issued a detailed, 14-page memo to the Chairman (the OGC memo) addressing whether 

Chairman Gensler’s participation in matters involving MFGI leading up to the determination to 

cease participation (without seeking ethics advice) was permissible.

195 The memo solely 

addressed matters before the Commission prior to and at the time of the Chairman’s election not 

to participate,196 and based on the facts relayed in the memo concluded as follows:

In sum, this review determines, based on the facts and circumstances stated herein, that 

there is not a reasonable basis under 5 C.F.R. § 2635.502 to question Chairman Gensler’s 

impartiality with respect to the Commission’s investigation of MFGI and involvement in 

related matters, such as the MFGI bankruptcy proceedings. Accordingly, 5 C.F.R. 

§ 2635.502 does not preclude Chairman Gensler’s participation in these matters, and 

Chairman Gensler is not required to withdraw from participation. From a legal and 

 193 Continuing Oversight of the Wall Street Reform and Consumer Protection Act, 112th Congress, December 1, 

2011, beginning at 2:18:15 of the recording (available at: 

http://www.ag.senate.gov/templates/watch.cfm?id=c5590145-5056-a032-52a3-4ffaa4613b7d). Information about 

the hearing, including published testimony, is available here: http://www.ag.senate.gov/hearings/continuingoversight-of-the-wall-street-reform-and-consumer-protection-act. 

194 Id. at 2:21:45 of the recording. 

195 The OGC memo is available here: 

http://www.cftc.gov/ucm/groups/public/@freedomofinformationact/documents/file/participationmattersmfg.pdf. 

196 OGC memo, page 15, fn. 46. 
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ethical perspective, Chairman Gensler’s participation in Commission matters involving 

MFGI would not be improper.197

The OGC memo analyzed the Chairman’s participation under section 2635.502 of the 

OGE regulations, 5 C.F.R. § 2635.502. Part 2635 houses the Standards of Ethical Conduct for 

Employees of the Executive Branch; section 502 is located under Subpart E, which addresses 

impartiality in performing official duties in instances where personal or business relationships 

exist. Section 502 governs the conduct of federal employees in connection with “particular 

matters” that are likely to have a direct and predictable effect on the financial interest of a 

member of the employee’s household or an individual with whom the federal employee has a 

“covered relationship.”198 A federal employee may not participate in a particular matter with a 

member of his household or with any person who is a “covered relationship” unless he has 

informed the agency designee of the appearance problem and received authorization from the 

agency. 

The OGC memo concluded that the Chairman did not have a covered relationship with 

the following individuals:

Jon Corzine – Chairman Gensler worked with Jon Corzine during his last 6 years at 

Goldman Sachs (1991-1997). During two of those years, Chairman 

Gensler reported directly to, among others, Mr. Corzine; and during four 

additional years Mr. Corzine was Chairman Gensler’s second line 

supervisor. Though he has encountered Mr. Corzine variously over the 

 197 OGC memo at 15.

198 5 C.F.R. § 2635.502 provides that a federal employee has a covered relationship with the following people: 

(i) A person, other than a prospective employer described in § 2635.603(c), with whom the employee has or 

seeks a business, contractual or other financial relationship that involves other than a routine consumer 

transaction;

Note: An employee who is seeking employment within the meaning of § 2635.603 shall comply with subpart F of 

this part rather than with this section.

(ii) A person who is a member of the employee's household, or who is a relative with whom the employee 

has a close personal relationship; 

(iii) A person for whom the employee's spouse, parent or dependent child is, to the employee's knowledge, 

serving or seeking to serve as an officer, director, trustee, general partner, agent, attorney, consultant, 

contractor or employee;

(iv) Any person for whom the employee has, within the last year, served as officer, director, trustee, general 

partner, agent, attorney, consultant, contractor or employee; or

(v) An organization, other than a political party described in 26 U.S.C. 527(e), in which the employee is an 

active participant. Participation is active if, for example, it involves service as an official of the 

organization or in a capacity similar to that of a committee or subcommittee chairperson or spokesperson, 

or participation in directing the activities of the organization. In other cases, significant time devoted to 

promoting specific programs of the organization, including coordination of fundraising efforts, is an 

indication of active participation. Payment of dues or the donation or solicitation of financial support does 

not, in itself, constitute active participation.
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years at professional events, Chairman Gensler does not have a personal 

relationship with Mr. Corzine.199 Duration of acquaintance: 

approximately 20 years. Jon Corzine was CEO and Chairman of the 

Board of MFGI’s parent corporation, and was on the board of MFGI.

Bradley I. Abelow – Bradley Abelow joined Goldman Sachs in 1989200 and made partner in 

1998.201 Chairman Gensler worked with Bradley Abelow at Goldman 

Sachs and had a weekly to bi-weekly working relationship. Mr. Abelow

retired from Goldman Sachs in 2004, and later worked with Corzine while 

he was Governor of New Jersey.

202 Chairman Gensler had no social 

relationship with Mr. Abelow and saw him only at occasional professional 

events. They possibly spoke during the presidential primary season in 

2008.203 Duration of acquaintance: approximately 20 years. Mr. Abelow 

was President and Chief Operating Officer of MFGI’s parent corporation, 

and also Chief Operating Officer of FINCO, and was on the board of 

MFGI.

Christopher Flowers –Mr. Flowers worked with Chairman Gensler at Goldman Sachs from 1979 

until 1991, but did not work together on any specific deals. They might 

have had lunch once while Chairman Gensler was at the Treasury 

Department. On October 31, 2011, Mr. Flowers tried to reach Chairman 

Gensler at CFTC headquarters, and Chairman Gensler returned the call to 

Mr. Flowers, and spoke with him in a conference call with other MFGI

Officials, including Jacob Goldfield, Henri Steenkamp, and others. 

Duration of acquaintance – approximately 20 years. In 2008, JC Flowers 

& CO. invested $150 million in MF Global in exchange for preferred 

shares and a seat on the parent company’s board.204

Laurie Ferber – Ms. Ferber worked at Goldman Sachs from 1987 to 2008 where she 

served in a number of capacities, including General Counsel of J. Aron & 

Company and Co-General Counsel of the Fixed Income, Currency and 

Commodities Division; she also headed the Goldman Sachs Derivatives 

Legal Group, and served as Chief of Staff of the Global Business 

 199 The OGC memo states that Chairman Gensler and Mr. Corzine generally have met when they both were present 

at a function presented by others, and do not attend each other’s professional and personal major life events, such as 

inaugurations, weddings, or religious events. OCG memo at 7-8. 

200 A Career in the (Budget) Balance, The Star-Ledger, Final Edition, News, Pg. 1, March 20, 2006.

201 With Stock Issue Ahead, Goldman, Sachs Names 57 as Partners, The New York Times, Late Edition-Final, 

Section C, Page 1, Column 2, October 21, 1998. 

202 Corzine to Nominate a Former Colleague as State Treasurer, The Star Ledger, Final Edition, New Jersey, pg. 15 

(January 13, 2006).

203 OGC memo at 9. 

204 Trustee report at page 57, n.55.
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Selection and Conflicts Group.205 Chairman Gensler may have spoken 

with Ms. Ferber on one or more compliance matters when he was at 

Goldman Sachs. Length of acquaintance – possibly 20 years. Ms. Ferber 

was General Counsel of MFGI’s parent corporation and was on the board 

of MFGI. 

Jacob Goldfield – The OGC memo reported that Chairman Gensler met Mr. Goldfield in late 

1991 or early 1992, when both were in Fixed Income at Goldman Sachs. 

They had some overlapping responsibilities, and they may have served 

together on the Goldman Sachs Risk committee. They met once at CFTC 

headquarters since Chairman Gensler was sworn in; no official business 

was discussed.206 Length of acquaintance – about 20 years. 

Mr. Goldfield was not like the others. He was not employed at MFGI leading up to the 

last week of October, but David Schamis, a Director at MF Global Holdings, Ltd., called Mr. 

Goldfield on Tuesday, October 25, seeking assistance with MFGI during its final week.207 Mr. 

Goldfield was on site at MFGI’s New York Office during that last week; he conveyed his 

greetings to Chairman Gensler during a conference call between MFGI and regulators on Sunday 

October 30 and he participated in a conference call on Monday morning, October 31. 

In addition, the Chairman exchanged email with Jacob Goldfield on October 30 and 

October 31; the email was previously described in the OGC memo:

On October 30, 2011, Mr. Goldfield e-mailed Chairman Gensler to inform him 

that he was at MF Global "in case there are questions." Mr. Goldfield also 

informed Mr. Gensler that he had "no financial interest in the company and [was] 

not looking at it for investment." Mr. Gensler asked Mr. Goldfield whether there 

were "any observations you wish to pass along?" Mr. Goldfield replied, "Not as of 

now, I want only to send along novel insights that are useful." Chairman Gensler 

responded, "Novel and useful. Now those are limiting conditions, though I would 

say that most everything you have shared over our long knowing each other has 

been useful." Mr. Goldfield then stated, "Also want to make sure that I am right 

before I comment." Chairman Gensler does not recall any further comments or 

information from Mr. Goldfield.208 

 205 Business Week Executive Profile of Laurie R. Ferber, Esq., available at 

http://investing.businessweek.com/research/stocks/people/person.asp?personId=53017963&ticker=MFGILQ. 

206 OGC memo at 11.

207 OGC memo at 11. 

208 OCG memo at 10-11.
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Mr. Goldfield and Mr. Gensler also shared banter presumably regarding Mr. Goldfield’s 

reputed expertise with financial catastrophe,209 with Mr. Gensler remarking of Mr. Goldfield, 

“[e]ver present you are,” and Mr. Goldfield replying, “[t]he Zelig210 of crises.”211 

The OGC memo noted that, when Chairman Gensler left Goldman Sachs in 1997, there 

were approximately 190-200 partners at Goldman Sachs. The large number of former partners 

gives some perspective as to the rationale for not requiring non-participation in matters involving 

former business colleagues where no covered relationship exists, as does the passage of time 

from the working relationships at issue, all of which terminated in 1997.

The General Counsel and Designated Agency Ethics Official concluded that the 

individuals described above had no covered relationship to the Chairman under section 

2635.502, stating: “both during their partnership and afterwards, the relationship between 

Chairman Gensler and Mr. Corzine was exclusively a professional relationship.” 212 

The OGC memo also opined that the facts in this matter did not give rise to a situation 

that, under section 2635.502, would cause a reasonable person with knowledge of the relevant 

facts to question the Chairman’s impartiality with regard to MFGI: 

The sole fact that Chairman Gensler at one time was a business partner 

with Mr. Corzine, without more, does not constitute a reasonable basis, 

within the meaning of § 2635.502, to question Chairman Gensler’s 

impartiality with respect to matters relating to MFGI. 

Once the one-year cooling-off period has passed, the fact that an employee 

previously was within a covered relationship with respect to another 

individual, without more, cannot by itself be the basis to reasonably 

question an employee’s impartiality. To hold otherwise would, in effect, 

transform the one-year cooling off period into a lifetime prohibition, for in 

every such instance the covered relationship within the one-year period 

could be cited as the basis for disqualification beyond the one-year period.

The ethics regulations do not require such a result. To the contrary, the 

procedures in § 2635.502 clearly contemplate that employees who at one 

time may have had a covered relationship with respect to another person 

or entity, but that no longer have such a covered relationship, may

 209 Mr. Goldfield’s financial crisis expertise is newsworthy. See The Last Days of MF Global, by Peter Elkind and 

Doris Burke, Fortune Magazine/CNN, June 4, 2012, available here: http://finance.fortune.cnn.com/2012/06/04/thelast-days-of-mf-global/. 

210 Zelig, Dir. Woody Allen. Perf. Woody Allen, Mia Farrow, Patrick Horgan. Orion, 1983. Film.

211 Email dated October 30, 1:10 pm EST. Author: Jacob Goldfield. Recipient: Chairman Gensler. 

212 In the course of our review we encountered no other individuals related to MFGI who had a covered relationship 

with the Chairman.
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participate in a matter involving the person or entity that previously was 

within the covered relationship.

To constitute a reasonable basis to question Chairman Gensler’s 

impartiality, therefore, there must be some additional indicia of a 

relationship between Chairman Gensler and Mr. Corzine, Goldman Sachs, 

or its partners, beyond the factors that would establish a covered 

relationship; i.e., facts in addition to Chairman Gensler’s partnership at 

Goldman Sachs some 14 years ago. However, the facts regarding 

Chairman Gensler’s relationship with Mr. Corzine and others at Goldman 

Sachs who are now associated with MFGI – both during the time that 

Chairman Gensler worked at Goldman Sachs and afterwards -- are 

insufficient to provide such indicia. 213

The General Counsel and Designated Agency Ethics Official’s determination that there 

were no appearance issues was made after consultation with the Office of Government Ethics.214 

The OGC memo fully explained why there was no reason to refrain from participation, and 

offered no considerations that might weigh in favor of non-participation. 

On December 14, 2011, the Chairman addressed the non-participation decision in a letter 

addressed to Representative Neugebauer. He generally described his participation during in the 

final days of MFGI, and stated that his decision to not participate was motivated by his 

determination that his continued participation could be a distraction to the Commission. The 

Chairman opined that the fact that MFGI had evolved into an Enforcement matter, mattered to 

him, and –

...as it turned to a specific enforcement matter that could involve not just the 

company but specific individuals, I informed the General Counsel of my decision 

on November 3 that I would not participate. My decision was in order to ensure 

that my participation did not serve as a distraction from the Commission’s 

important duties to locate customer funds and conduct an enforcement matter. 

Subsequently, I executed a “Statement of Non-Participation” to document my 

decision. 215

 213 OGC memo at 13-14 (footnotes omitted). We agree with this memo insofar as it relates to the Chairman’s 

relationship with the named individuals subsequent to his departure from Goldman Sachs, but we do not address or 

express agreement with the statement that the Chairman’s relationships with the named individuals during his time 

at Goldman Sachs “were insufficient to provide such indicia.”

214 We would note that OGE has instructed all federal employees: 

Although using the procedures provided for in 5 C.F.R. § 2635.502 is encouraged and recusal may be appropriate in 

certain situations not expressly identified in the regulation, employees should keep in mind that they have a 

responsibility to act on matters that are within the scope of their duties whenever they are not disqualified by 

conflicts or appearance concerns. 

OGE 98x9, April 26, 1999, Regarding Recusal Obligation and Screening Arrangements. http://www.oge.gov/OGEAdvisories/Legal-Advisories/99x8--Recusal-Obligation-and-Screening-Arrangements/.

215 Chairman Gensler’s letter to Representative Randy Neugebauer, December 14, 2011. 
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On March 13, 2012, the Chairman again discussed the non-participation decision in a 

letter to Representative Neugebauer, this time stating:

As this matter turned to a possible civil or criminal enforcement matter that could 

involve not just the company but specific individuals, I informed the General 

Counsel of my decision on November 3 that I would not participate. The General 

Counsel advised me that I was not required to withdraw from participation. 

Fourteen years ago when I left Goldman Sachs & Co., I was a partner of Mr. 

Corzine’s. During part of my tenure at the firm, he also was my supervisor. At 

the time of my decision, he was the CEO of MFG. I did not want my previous 

relationship with him to be a distraction from the agency’s important mission to 

locate customer funds and bring enforcement actions as appropriate.216 

The Chairman told us that, as he was on the Agency’s litigation hold list for litigation 

matters involving MFGI, he did not feel comfortable participating in Enforcement matters 

regarding MFGI. 

We considered whether the Chairman’s inclusion on the Agency’s litigation hold list for 

potential MFGI-related litigation required recusal under OGE regulations or guidance. 217 It is 

clear that the Chairman participated in discussions with outside counsel for MFGI and other 

MFGI officials, including Corzine,218 during MFGI’s final days. Requests for status or 

documents, without more, should not require non-participation by a Commissioner or Chairman

in Agency litigation pertaining to MFGI.

219 

We also take note that the Chairman has made similar calls to other market professionals 

during his tenure at CFTC. In fact, in the days following the collapse of MFGI, the Chairman 

assisted with the limited review of FCMs performed by the CFTC, CME and NFA, making 

direct calls to CFTC registrants as deemed necessary.220 In short, it does not appear that 

 216 Chairman Gensler’s letter to Representative Randy Neugebauer, March 13, 2011.

217 The OGE has addressed non-participation in the context of Agency adjudicatory proceedings, using the recusal 

statute for federal judges (28 U.S.C. § 455) as a guide; however, the OGE has recognized in the context of 

administrative adjudications a “rule of necessity” which may operate to authorize or perhaps require participation 

where recusal would otherwise be mandated, for instance where a recusal would eliminate the presence of a quorum 

where no other decision-maker is available. See, OGE 85x14, Sept. 23, 1985 (http://www.oge.gov/OGEAdvisories/Legal-Advisories/85x14--Appearance-Issues-Arising-from-Financial-Interest-of-GovernmentEmployee%e2%80%99s-Sibling/); OGE 83x18, Nov. 16, 1983 (http://www.oge.gov/OGE-Advisories/LegalAdvisories/83x18--Recusal-of-a-Commissioner-when-Son-s-Law-Firm-Represents-a-Party/). 

218 In a letter to Representative Neugebauer, Chairman Gensler described his actions during the final days of MFGI: 

“Though it was not always apparent which representatives from MFG were present on these calls, to the best of my 

knowledge and recollection, Mr. Corzine was on the line for at least part of one of these calls, and discussed matters 

regarding MFG’s European bond positions.” Chairman Gensler letter to Rep. Neugebauer, Dec. 14, 2011. 

219 See 28 U.S.C. § 455(b)(1) (recusal is required where a federal judge “has a personal bias or prejudice concerning 

a party, or personal knowledge of disputed evidentiary facts concerning the proceeding”). 

220 More information about the limited review may be found here: 

http://www.cftc.gov/PressRoom/PressReleases/pr6171-12. 
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Chairman Gensler treated MFGI differently than he generally treats any other registrant, if his 

assistance is needed.221 However, the Chairman has not issued a non-participation statement in 

any other Enforcement matter. 

An Analysis of Whether and How a Decision by CFTC Chairman Gary Gensler to 

Recuse Himself from Previous Matters Relating to MFGI Would Have Been Consistent 

with the CFTC’s Official Recusal Policy 

We do not believe the Chairman was required to recuse himself from previous matters 

relating to MFGI under applicable OGE regulations. CFTC has not adopted more detailed 

policies. 

It is public knowledge that the Chairman has spoken with numerous CFTC registrants 

and their representatives in the context of the numerous rulemakings undertaken by the 

Commission pursuant to Dodd-Frank and otherwise. External meetings held in connection with 

Dodd-Frank rulemaking efforts are documented on the CFTC’s website.222 It is well established 

that matters of general application, such as rule makings, are generally not subject to 

disqualification.223 Certainly if a CFTC official colluded with a former professional colleague to 

corrupt the rulemaking record, that would be actionable, but of course it would be equally 

improper if the parties were total strangers. Communicating with former professional colleagues 

in connection with rulemaking efforts of general application that are relevant to both generally is 

not improper for any federal employee. 

With regard to the Chairman’s participation in phone calls and other matters during the 

MFGI’s final days, the Chairman’s participation was consistent with the advice he later received 

from the General Counsel and Designated Agency Ethics Official. 

 221 Governmentwide standards of conduct require that “[e]mployees shall act impartially and not give preferential 

treatment to any private organization or individual.” 5 C.F.R. § 2635.101. In addition, employees must ensure there 

is no appearance of giving preferential treatment to friends. 5 C.F.R. § 2635.702(d) (“To ensure that the 

performance of his official duties does not give rise to an appearance of ... giving preferential treatment, an 

employee whose duties would affect the financial interests of a friend, relative or person with whom he is affiliated 

in a nongovernmental capacity shall comply with any applicable requirements of § 2635.502”). 

222 http://www.cftc.gov/LawRegulation/DoddFrankAct/ExternalMeetings/ExternalMeetingsAll/index.htm. 

223 OGE 06 x 9, October 4, 2006, Regarding “Particular Matter Involving Specific Parties,” “Particular Matter,” 

and “Matter.” (http://www.oge.gov/DisplayTemplates/ModelSub.aspx?id=2147483853).
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Conclusion

We have undertaken to answer in detail eight questions posed by Senator Shelby. In the 

aftermath of MFGI, a number of regulatory and industry initiatives have taken place to increase 

the safety of customer funds, including increased reporting requirements, notification 

requirements for large transfers of customer funds out of protected accounts, changes to 

permissible investments that may be made with customer segregated funds, and a prohibition 

against internal transactions among affiliates with customer funds.224 We were not asked to 

make recommendations, and make none here. 

Nevertheless, we do have observations based on our fieldwork. In some instances, our 

fieldwork raised or revealed issues that could not be addressed in the context of our response to 

 224 The regulatory response to MFGI includes: 

Jan 18, 2012 -- Futures industry self-regulatory organizations (CME Group, National Futures Association (NFA), 

InterContinental Exchange (ICE), the Kansas City Board of Trade (KCBOT) and the Minneapolis Grain Exchange 

(MGEX)) formed a joint committee to address customer segregation issues. 

http://www.nfa.futures.org/news/newsRel.asp?ArticleID=3944.

February 17, 2012 -- The Commission proposed to amend Commission Rule 1.25 in December 2011 to, among 

other things, prohibit the investment of customer segregated funds in foreign sovereign debt, and transactions with 

affiliates. The new rule, which also included other investment prohibitions and other provisions, became effective 

February 17, 2012. 76 Fed. Reg. 78,776 (Dec. 19, 2011). http://www.gpo.gov/fdsys/pkg/FR-2011-12-19/pdf/2011-

31689.pdf.

May 1, 2012 -- Enhanced reporting implemented. CME Group Advisory Notice: Enhanced Customer Protections 

(April 2, 2012), http://www.cmegroup.com/tools-information/lookups/advisories/clearing/AIB12-04.html. 

May 24, 2012 -- FCMs are now required to file daily cap, seg, and secured statements. See CME Group Advisory 

Notice: Daily Segregated, Secured 30.7 and Sequestered Statements (May 24, 2012), 

http://www.cmegroup.com/toolsinformation/lookups/advisories/clearing/Daily_Segregatedx_Secured_30.7_and_Sequestered_Statements.html. 

July 13, 2012 – CFTC approved new financial rules submitted by the NFA to strengthen the protection of customer 

funds held by FCMs. This includes restrictions on removing funds from customer accounts. The CFTC’s press 

release is available here: http://www.cftc.gov/PressRoom/PressReleases/pr6303-12. NFA’s rule submission is 

available here: 

http://www.nfa.futures.org/news/PDF/CFTC/FR_Sec_16_ProtectionCustomerFunds_IntNotc_0517.pdf. Further 

information is available here: http://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4116. 

August 16, 2012 – NFA approved a new requirement for FCMs to provide its DSRO with view-only access via the 

Internet to account information for each of the FCM’s customer segregated fund accounts maintained and held at a 

bank or trust company. NFA’s press release is available here: 

http://www.nfa.futures.org/news/newsRel.asp?ArticleID=4092. NFA’s notice to CFTC is available here: 

http://www.nfa.futures.org/news/.%5CPDF%5CCFTC%5CFR_Sec_4_OnLineAccessToFCMCustomerBankInfo_0

82012.pdf. 

October 23, 2012 -- CFTC proposed to adopt new regulations and amend existing regulations to require enhanced 

customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, 

customer disclosures, and auditing and examination programs for futures commission merchants ("FCMs"). 77 FR 

67866 (Nov. 14, 2012) (available here: http://www.cftc.gov/LawRegulation/FederalRegister/ProposedRules/2012-

26435). The comment period closed on February 15, 2013. 78 FR 4093 (Jan. 18, 2013) (available here: 

http://www.cftc.gov/ucm/groups/public/@lrfederalregister/documents/file/2013-00820a.pdf). 
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Senator Shelby, and may be suitable for further review by CFTC OIG. Our concerns are detailed 

briefly below.

We are concerned with the FCM oversight processes in place in October 2011 by the 

Examinations Branch. There were no manuals. The reports created by the Examinations Branch 

did not conform to audit standards, and it does not appear that the Examinations Branches were 

subject to peer reviews or other detailed internal examination. This does not ipso facto mean that 

the Examinations Branch performed poorly; we stress that we did not formally audit or review 

the Examinations Branch’s overall operations in the course of our fieldwork, and we understand 

that improvements in Examinations Branch processes are ongoing. 

In retrospect, it is clear that customer funds were in jeopardy even while CFTC staff was 

on site at MFGI Offices in New York and Chicago during the firm’s final days. We are 

concerned that CFTC staff were not able to obtain same day access to all documentation for 

MFGI’s cap, seg, and secured statement on October 27. With CFTC’s higher ranking 

supervisory auditor in Chicago teleworking on both Thursday and Friday of MFGI’s final week, 

we wonder if the request was not taken as seriously as it might have been had she been on site 

with staff (especially on Friday after failing to obtain the requested documents on Thursday), 

both by virtue of her position and because she took a leadership role in the MFGI Chicago Office 

on Sunday. Her absence did not alter MFGI’s obligations under Commission regulations nor did 

it alter any other legal obligations. However, for a matter of this importance, we believe the 

attendance of the higher ranked supervisory auditor would have conveyed a stronger message to 

MFGI. We are also concerned at the lack of procedure (formal or informal) in place to guide the 

process of requesting documentation of a cap, seg, and secured statement, and to address delays 

in production. We are concerned that the staff document request, in the end, was not an effective 

mechanism to assure the Commission that customer funds were protected. We are concerned 

that CFTC staff and management did not learn that MFGI was experiencing a run on the bank 

until after the fact. 

During the final days of MFGI, it appears that multiple regulators were making 

duplicative requests for status and information from MFGI, and from each other. Better 

coordination likely would not have changed the eventual fate of MFGI, but certainly would have 

been desirable. We are concerned that the lack of coordination wasted both time and effort by all 

involved. 

We are concerned at the lack of communication between CFTC and CME. We learned 

that CME and CFTC did not formally coordinate efforts during the last week of MFGI, and that 

they were both on site on Thursday and over the weekend apparently by coincidence. That better 

coordination could improve performance is an obvious observation. 

We are also concerned with the lack of communication between CFTC and SIPC. But 

for a conversation overheard on site at MFGI on Monday October 31, CFTC staff would not 

have known that the SIPC trustee was on the way to the courthouse, and the SIPC filing as 

drafted did not protect the interests of MFGI’s FCM customers.
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We are concerned with the Chairman’s use of personal email to conduct official business. 

Our review of the Chairman’s personal email was limited; we examined email related to MFGI 

as necessary to address the issues raised by Senator Shelby. 

Finally, we are concerned with the Chairman’s determination to withdraw from 

participation. Because OGE regulations as interpreted by the General Counsel and Designated 

Agency Ethics Official did not require a recusal in this situation,225 whether to refrain voluntarily 

from participation in order to avoid improper appearances involved a significant judgment call, 

as prominent voices expressed support for both continued involvement and immediate recusal at 

the time. Therefore, a decision to participate or to recuse would subject the Chairman to 

potential criticism. 

Nevertheless, seeking ethics advice only when the matter became a public sensation –

after both leading the Agency’s response to the ongoing crisis and voting to authorize the

Enforcement investigation – was not the most desirable course. While seeking guidance at the 

outset would have been preferable, we agree with the General Counsel and Designated Agency 

Ethics Official that the Chairman violated no OGE regulations by waiting until after he began to 

participate to seek advice. It is the extent of his participation prior to requesting advice that is 

troubling. 

Moreover, after requesting guidance from the General Counsel and Designated Agency 

Ethics Official, the Chairman’s actions ran counter to the legal advice he received. Determining 

to withdraw from participation on November 3 disadvantaged the Commissioner who now had to 

take on this work at a late stage, possibly without the same level of industry experience as the 

Chairman. Moreover, the Commissioner was not as involved as the Chairman in the intricacies 

of the MFGI situation. A learning curve potentially loomed. We stress this was a potential 

possibility rather than a certainty. 

 225 OGC memo at 15 (approving the Chairman’s participation prior to November 3); fn. 188 and accompanying text 

(the General Counsel and Designated Agency Ethics Official on November 3 advised the Chairman that recusal was 

not required at that time).