UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORI( 

U.S. COMMODITY FUTURES TRADING 

COMMISSION, 

Plaintiff, 

v. 

MF GLOBAL INC., 

MF GLOBAL HOLDINGS LTD., 

JON S. CORZINE, and 

EDITH O'BRIEN, 

Defendants. 

JURYT 

ECFCase 

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF 

AND FOR CIVIL MONETARY PENALTIES UNDER 

THE COMMODITY EXCHANGE ACT 
The U.S. Commodity Futures Trading Commission ("Commission" or "CFTC"), by and 

through its attorneys, alleges as follows: 

I. SUMMARY 

1. It has long been a cornerstone of customer protection laws that a commodity 

futures broker, known as a futures commission merchant ("FCM"), must at all times segregate 

customer funds intended for futures trading on U.S. exchanges ("customer segregated funds") 

and may never use these customer funds for the FCM' s own purposes. When an FCM knows or 

should know that accounts holding customer segregated funds ("customer segregated accounts") 

do not hold sufficient funds to meet the FCM's financial obligations to all customers, the FCM, 

through its responsible personnel, must immediately notify the CFTC and the applicable 

designated self-regulatory organization ("DSRO"). To safeguard customer funds further, CFTC 

regulations limit an FCM's ability to invest customer funds to ce1iain authorized investments. In 

this case, MF Global Inc. ("MF Global"), an FCM with deficient systems and controls, on the 

brink of failure and in desperate need of cash to survive, invaded its customer funds and violated 

these fundamental customer protections on a scale never previously seen in the U.S. futures 

markets, harming thousands of people. As alleged below, Jon Corzine, the Chief Executive 

Officer ("CEO"), is legally responsible for MF Global's misuse of customer money. Edith 

O'Brien, MF Global's Assistant Treasurer, is also liable. 

2. Defendant MF Global was an FCM registered with the Commission and was a 

subsidiary ofMF Global Holdings Ltd. ("Holdings"). Holdings was the holding company and 

parent of almost fifty separate direct or indirect subsidiaries, including MF Global (MF Global, 

Holdings, and their subsidiaries and affiliates are collectively refened to herein as the "Firm"). 

3. Defendant Jon S. Corzine ("Corzine") joined the Firm as the CEO for Holdings in 

March 20 1 0. He planned to grow and conve1i the Firm from a business that generated most of 

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its revenue from its FCM to a major Wall Street investment bank that generated revenue from 

proprietary trading and other business lines. As part of that plan, and to increase revenues, 

Corzine caused MF Global to make significant investments in various instruments, such as the 

sovereign debt of certain European countries. Over time, at Corzine's direction, these 

investments grew substantially and became a material portion of the Firm's balance sheet, even 

as the investments grew increasingly risky. 

4. By the latter half of 2011, these investments and other factors placed significant 

strains on the Firm's capital and liquidity. By late October 2011, the Firm's sources of cash 

were drying up, and the Firm was in desperate need of funding to survive. The Firm took steps 

to sell itself to another financial services company. Firm employees, including Corzine, 

communicated with one another, sometimes by email and sometimes on recorded telephone 

lines, concerning the Firm's dire situation. 

5. During the last week of October 2011, in violation of U.S. commodity laws, with 

viltually no other sources of cash to keep it afloat, MF Global unlawfully used nearly one billion 

dollars of customer segregated funds to suppmt its own proprietary operations and the operations 

of its affiliates. Thousands of customers were directly and indirectly harmed by these unlawful 

acts. On October 31, 2011, Holdings and certain other affiliated companies filed for bankruptcy 

protection. 

6. Corzine bears responsibility for MF Global's unlawful acts. He held and 

exercised direct or indirect control over MF Global and Holdings and either did not act in good 

faith or lmowingly induced these violations. In violation of his legal obligations, he also failed to 

supervise diligently the activities ofMF Global's officers, employees, and agents. 

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7. Defendant Edith O'Brien ("O'Brien") was the Assistant Treasurer ofMF Global 

and the head of liquidity management for the Firm. O'Brien directed, approved, and/or caused 

numerous illegal transfers of customer segregated funds to the Film's proprietary accounts, and 

otherwise aided and abetted MF Global's customer segregated fund violations. 

8. In addition, from at least January 2011 to May 2011, MF Global misused 

customer segregated funds by investing these funds in securities that were not considered readily 

marketable or highly liquid, in violation of a CFTC regulation. 

9. Holdings controlled the operations ofMF Global and is liable as a principal for 

MF Global's violations of the Commodity Exchange Act (the "Act") and the regulations 

promulgated thereunder ("CFTC Regulations"). 

10. Accordingly, pursuant to Section 6c ofthe Act, 7 U.S. C.§ 13a-1 the CFTC brings 

this action to enjoin Defendants' unlawful acts and practices and compel Defendants' 

compliance with the provisions of the Act and CFTC Regulations 17 C.F .R. § § 1.1 et seq. In 

addition, the CFTC seeks restitution, disgorgement, civil monetary penalties, and such other 

equitable relief as the Court may deem necessary or appropriate. 

II. JURJ[SDICTION AND VENUE 

11. This Court has jurisdiction over this action pursuant to Section 6c(a) of the Act, 

7 U.S. C. § 13a-l(a), which provides that whenever it shall appear to the Commission that any 

person has engaged, is engaging, or is about to engage in any act or practice constituting a 

violation of any provision of the Act or any rule, regulation, or order promulgated thereunder, the 

CFTC may bring an action in the proper District Court ofthe United States against such person 

to enjoin such practice, or to enforce compliance with the Act, or any rule, regulation, or order 

thereunder. 

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12.. Venue properly lies with this Court pursuant to Section 6c(e) ofthe Act, 7 U.S.C. 

§ 13a-1(e), because MF Global's and Holdings' principal place of business was in this District, 

Corzine was present in this District during the last week of October 2011, and the acts and 

practices in violation of the Act and CFTC Regulations have occurred within this District. 

III. THE PARTIE§ 

13. PlaintiffU.S. Commodity Futures Trading Commission (as defined above, 

"Commission" or "CFTC") is an independent federal regulatory agency that is charged with 

administering and enforcing the Act, 7 U.S.C. §§ 1 et seq., and the CFTC Regulations, 17 C.P.R. 

§§ 1.1 et seq. 

14. Defendant MF Global Inc. (as defined above, "MF Global") is a Delaware 

corporation with its principal place of business in New York, New York. MF Global provided 

brokerage services to various individual, corporate, and institutional customers. MF Global has 

been registered as an FCM since 1996 and was regulated by the CFTC and its DSRO, the 

Chicago Mercantile Exchange, Inc. ("CME"). As an FCM, MF Global accepted customer funds 

and was required to protect them by keeping them in customer segregated accounts. Since 1~96, 

MF Global also has been a member ofthe National Futures Association ("NFA"), a selfregulatory organization for the U.S. futures industry. MF Global also operated as a broker-dealer 

registered with the Securities and Exchange Commission. MF Global is cmrently the subject of 

a Securities Investor Protection Act ("SIP A") liquidation proceeding in the banluuptcy comi for 

this District. See In re MF Globallnc.,·Case No. 11-2790 (MG) SIPA, (Banlu. S.D.N.Y. 2011). 

15. Defendant MF Global Holdings Ltd. (as defined above, "Holdings") is a 

Delaware corporation with its principal place of business in New York, New York. Holdings 

filed for reorganization under Chapter 11 ofthe Banluuptcy Code on October 31,2011. See In 

re MF Global Holdings Ltd., eta!., Case No. 11-15059 (MG) (Banlu. S.D.N.Y. 2011). 

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Holdings' direct subsidiary and the holding company of its U.S. subsidiaries, including MF 

Global, was MF Global Holdings USA Inc., which was a listed principal ofMF Global in MF 

Global's registration filings with the NFA. 

16. Defendant Jon S. Corzine (as defined above, "Corzine") became CEO and 

Chairman of the Board of Directors of Holdings in March 2010 and continued as such through 

the commencement of the bankruptcy proceedings on October 31, 2011. He also was the CEO 

ofMF Global from September 1, 2010 through the commencement ofthe liquidation 

proceedings on October 31, 2011. In addition, Corzine was a member of the Board of Directors 

of MF Global. The Film's global Chief Financial Officer ("CFO"), Chief Operating Officer 

("COO"), and General Counsel ("GC") repmied directly to Corzine. Corzine was registered 

with the CFTC as an Associated Person ofMF Global fi:om August 2010 to November 2011 and 

was listed as a Principal ofMF Global from May 2010 to November 2011. 

17. As CEO for both Holdings and MF Global, Corzine, among other things: 

a. had the power and ability to control cash transfers involving MF Global's 

accounts and controlled the employees responsible for making wire transfers involving its 

·accounts; 

b. made management and hiring decisions; 

c. influenced how proprietary funds were invested; 

d. issued instructions on day~to~day matters and operations; 

e. made and influenced corporate policy; 

f. acted as a regulatory liaison for .MF Global; and 

g. supervised the activities ofMF Global's officers, employees, and agents. 

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18. From January 2006 to January 2010, Corzine was New Jersey's 54th Governor. 

From January 2001 to January 2006, he was United States Senator from New Jersey, serving as 

a member of the Senate Banking, Budget, Energy and Natural Resources, and Intelligence 

Committees. Prior to serving in the United States Senate, Corzine was the Chairman and Senior 

Pminer of a major Wall Street investment bank, the Goldman Sachs Group, L.P., from 

December 1994 to June 1998, and its Co-Chailman and Co-Chief Executive Officer from June 

1998 to January 1999. 

19. Defendant Editlhl O'Brien (as defined above, "O'Brien") was the Assistant 

Treasurer and functional head ofMF Global's Treasury Depattment during October 2011. As 

the head ofMF Global's Treasury Department, O'Brien among other things: 

a. supervised MF Global's Treasury Department, which handled the cash 

management of the Finn, and was responsible for directing, approving, and/or causing 

wire transfers and other payments into and out ofMF Global's customer accounts; 

b. tracked the amount of funds sent from MF Global's customer accounts 

during the day and communicated with other MF Global employees with respect to these 

transfers and their effect on the customer segregated accounts; 

c. managed cash flow to satisfy MF Global's liquidity needs; 

d. forecasted and projected the amount of cash available for the Firm's 

liquidity needs; 

e. had responsibility for investing customer segregated funds pursuant to 

CFTC rules; 

f. liaised with other MF Global depmiments regarding cash transfers; and 

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g. answered questions from other MF Global employees regarding customer 

segregation laws and rules, and requested that other MF Global employees direct 

customer questions regarding "customer segregation" to her. 

20. O'Brien has referred to herself as the MF Global employee "best versed on 

Regulatory and Customer Protection." Holdings' Global Treasurer appointed her to be the head 

of global liquidity in the weeks just before Holdings' bankruptcy and MF Global's liquidation 

proceedings. As an employee of the Film, 0 'Brien had a duty to notify management of any 

instances of non-compliance with any applicable laws or regulations or Firm compliance-related 

policies. She has never been registered with the CFTC in any capacity. 

IV. FACTS 

A. The Commodity Exchange Act and CFTC Regulations 

Require FCMs to Protect Customer Funds 

21. Pursuant to the regulations in effect during the period relevant to this Complaint, 

customer funds are all money, securities, and property received by an FCM or by a clearing 

organization from, for, or on behalf of futures customers or options customers. 

22. FCMs are required to account separately for and segregate customer funds at all 

times. Customer segregated funds are held in customer segregated accounts that are named so as 

to identity the account clearly as one containing customer funds pursuant to the Act and CFTC 

Regulations. 

23. An FCM must at all times have enough funds in customer segregated accounts to 

satisfy the FCM's financial obligations to all of its customers who entrust the FCM with funds 

for purposes oftrading on U.S. futures exchanges. This amount of funds is known as the "net 

liquidating value" (or "NL V") and is calculated by the "NL V method." An FCM is considered 

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"under-segregated" or "under-seg" and in violation ofthe law and CFTC Regulations if the 

customer segregated account balances fall below the required NL V level. 

24. An FCM is also required at all times to have a certain minimum amount of funds 

held in separate accounts to satisfy a p01iion of the FCM's financial obligations to its "foreign 

futures customers," who entrust the FCM with funds for purposes of trading on foreign boards of 

trade or exchanges ("secured customer funds"). Pursuant to the regulations in effect during the 

period relevant to this Complaint, an FCM was permitted to use a cetiain amount of secured 

customer funds for the FCM' s own purposes and was permitted to keep in designated accounts 

for the benefit of foreign futures customers ("customer secured accounts") an amount of funds 

that was less than the FCM's total obligations to its customers trading on foreign boards of trade 

or exchanges. The methodology for calculating the required balance of secured customer funds 

that the FCM was required to maintain was known as the "altemative method" or the "altemative 

calculation." 

25. An FCM is required to adhere to cetiain requirements relating to the proper 

handling of customer funds in both customer segregated accounts and customer secured 

accounts. These requirements include notifying the CFTC and the FCM's DSRO immediately 

whenever the FCM knows or should know that the amount in either the customer segregated or 

customer secured accounts is less than that required by the Act and CFTC Regulations. 

26. An FCM is required to calculate as of the close of each business day the total 

amount of customer funds on deposit in customer segregated and customer secured accounts, 

respectively, and to compare those amounts to the total amount of customer funds required to be 

on deposit under the Act and CFTC Regulations. These daily computations must be completed 

prior to noon on the next business day. With respect to customer segregated accounts, MF 

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Global recorded this calculation (the "segregation calculation") in a repmi known as the "seg 

report" or "segregation report." 

27. An FCM's commodity futures customers generally hold futures positions that 

may fluctuate in value on a daily or intra-day basis. Each customer must pay to the FCM an 

amount of money known as "margin," which is a form of collateral, to account for potential 

changes in the value of that customer's futures position. When a customer's position deteriorates 

in value, the. customer may be required to pay additional margin. Conversely, when a customer's 

position increases in value, the FCM's financial obligation to the customer increases. As a result 

of these and other factors, an FCM's combined obligation to all customers fluctuates throughout 

each business day. 

28. Due to the fluctuations in an FCM's obligations to customers, FCMs like MF 

Global typically deposit their own proprietary funds along with customer funds in the customer 

segregated accounts to ensure that there are .sufficient funds in these accounts to be in 

compliance with the Act and CFTC Regulations at all times. The funds an FCM holds in 

customer segregated accounts above that which the Act and Regulations require it to maintain 

are known as "excess segregated funds," "excess seg," or simply "proprietary funds." 

29. Excess segregated funds can lawfully be used by an FCM for its own proprietary 

purposes. Customer segregated funds, in contrast, can never lawfully be used by an FCM for its 

own proprietary purposes. 

30. An FCM may invest customer segregated funds only if the investment is on the 

applicable CFTC Regulation's list of "permitted investments." This regulation is intended to 

control credit, liquidity, and market risk by requiring that investments satisfy ce1iain rating 

10 
requirements and concentration limits, and also that the investments be readily marketable and 

subject to prompt liquidation. 

B. Corzine Implemented a Business Plan to Change MF Global into a Major 

Investment Bank Thereby Increasing the Firm's Need for Liquidity and 

Exacerbating Risks Arising from Deficiencies in the Firm's Internal Controls and 

Systems 

31. In 2008, the Firm's FCM and broker-dealer business (the "broker-dealer") 

operations were merged into the single company MF Global. MF Global was one of the world's 

leading brokers for commodities and listed derivatives and provided access to more than seventy 

exchanges globally. 'MF Global was also an active broker-dealer in markets for fixed income 

securities, equities, and foreign exchange, and became one of approximately twenty primary 

dealers authorized to trade U.S. government securities with the Federal Reserve Banlc ofNew 

York. According to Holdings' annual report for the fiscal year ending March 31, 2011, and MF 

Global's financial statement for the fiscal year ending March 31, 2011, MF Global's revenue 

represented 57% of Holdings' worldwide revenue. 

32. When Corzine joined the Firm as its CEO in March 2010, MF Global was still 

principally a commodity brokerage firm that eamed revenue primarily from interest income for 

servicing customers' deposits and from commissions on customer transactions. Corzine planned 

to change the Film into a global investment banlc that generated substantial revenues from 

. proprietary trading activities. His plan included making increasingly larger and potentially 

riskier investments with MF Global's proprietary funds. 

The Investments in European Sovereign Bonds 

33. One of the proprietary trading strategies directed by Corzine was the investment 

in the sovereign debt (bonds) of cetiain European nations through repurchase-to-maturity 

transactions ("RTM(s)") with counterpatiies trading on the London Clearing House ("LCH"). 

11 
Under this RTM strategy, an MF Global affiliate, MF Global UK, Ltd. (together with its 

subsidiaries, "MFGUK"), purchased bonds on behalf ofMF Global. To finance the purchase of 

the bonds, MFGUK, on behalf ofMF Global, entered into an RTM with a counterpmiy trading 

on the LCH. Under an RTM, MFGUK borrowed money to pay for the bond, simultaneously 

pledged the bond as collateral on that loan, and was obligated to pay back the loan when the 

bond eventually matured. MF Global benefited from an RTM because it recorded an immediate 

gain on its books driven, in part, by the interest that the bonds paid over }ime. The risks in this 

strategy, however, included the fact that if the European nation defaulted prior to the maturity of 

the bond, MF Global could ultimately be left with a virtually wmihless bond but still have to pay 

back the entire amount of the loan. MF Global also was responsible for making margin 

payments related to these transactions, which increased over time as a credit crisis in Europe 

worsened. As the RTMs directed by Corzine increased in risk, MF Global needed to use more 

liquidity to meet the rising margin payments on these transactions. 

34. In Fall2010, Holdings' then-Chief Risk Officer (the "Former CRO") questioned 

Corzine's RTM strategy. He warned Corzine and Holdings' Board of Directors about the 

potential pitfalls of the strategy, including that the RTM positions could result in margin calls 

and more demands for cash, would be difficult to unwind, and posed a liquidity risk to the Firm. 

The Fmmer CRO recommended that the Firm place limits on the investments. 

35. Thereafter, Corzine and others decided to replace the Fmmer CRO, who left MF 

Global in March 2011. 

36. As the risks associated with his RTM strategy grew from 2010 to 2011, Corzine 

repeatedly sought and received approval from Holdings' Board of Directors to increase the risk 

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limits for these transactions and, as a result, also increased the size of the RTM positions during 

this period of time. 

Unwinding Violative Investments of Customer Segregated Funds 

Further Increased the Firm's Liquidity Stress 

3 7. In addition to the R TM portfolio, Holdings acquired a portfolio of securities that it 

classified as held-to-maturity ("HTM") assets on its balance sheet Holdings originally financed 

this HTM portfolio by bonowing MF Global customer segregated funds and pledging the HTM 

securities to the customer segregated accounts as collateral. In May 2011, while conducting an 

examination ofMF Global, CME auditors advised the Film that $525 million ofthe collateral 

was not in legally permissible investments for customer segregated funds. As a consequence of 

this violation, the Firm was required to and did unwind the financing and removed the 

impe1missible securities from the customer segregated accounts. Unable to use customer 

segregated funds to finance a pmiion of the HTM pmtfolio, the Firm was forced to obtain a more 

expensive form of financing from third patiies, which increased the Film's liquidity stresses. 

Deficiencies in the Firm's Internal Controls and Systems, of Which Corzine Was 

Aware, Contributed to the Unlawful Use of Customer Funds 

38. While Corzine was implementing his business plan for MF Global, he was aware 

that MF Global had inadequate controls and systems with regard to (a) regulatory repmting and 

(b) liquidity management, namely management of the Firm's liquid assets, such as cash, that 

could be and were used to fund the Firm's operations and investments. Corzine was informed 

that technology gaps existed that resulted in MF Global not producing accurate liquidity 

forecasts because the underlying data was inadequate and umeliable. Corzine failed to remedy 

these gaps. 

39. ymther, Corzine was informed that MF Global was overly reliant on systems that 

required manual performance, were susceptible to human enor, and/or created "an unnecessarily 

13 
'high reliance on key employees" for tasks in MF Global's Treasury and Finance depatiments, 

such as liquidity forecasting and regulatory calculations. 

40. Corzine received both written and verbal updates regarding MF Global's 

estimated liquidity position and forecasts on a daily basis. The written updates were summm·ized 

in a daily liquidity repoti that listed the sources and uses of the Firm's liquidity. The daily 

liquidity repotis and verbal updates included information gathered in pati from traders at MF 

Global. Corzine knew that due to the lack of real time liquidity data and lack of expetiise of 

traders in gathering this information, these updates were only estimates of sources and uses of 

MF Global's liquidity. Corzine nevetiheless relied on these liquidity estimates and forecasts. 

41. MF Global and Corzine failed to take sufficient steps to enhance MF Global's 

regulatory repmiing and liquidity management systems, or to address adequately their 

dependence on umeliable liquidity data and the manual process of preparing regulatory reports 

and forecasting the Firm's liquidity position. 

42. The failure to enhance or otherwise upgrade MF Global's systems and controls 

contributed to the Film's unlawful use of customer segregated funds. 

43. As further alleged below, Corzine directed, knew of, and petmitted the Firm's use 

of funds held in customer segregated accounts and customer secured accounts even though he 

knew, or with due diligence should have known, that these and other deficiencies in the Firm's 

controls and systems increased the risks that the Firm would unlawfully use customer funds for 

proprietary purposes during the liquidity crunch of the Firm's final days. 

C. As Liquidity Stresses Increased in 2011, Corzine Directed the JFirm 

To Explore Using Customer JFunds 

44. During the summer of2011, Corzine directed Holdings' CFO to explore all 

potential sources of funds and assets that could be used to meet the liquidity needs of MF 

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Global's proprietary trading activities. This included the use of customer funds to satisfy, in 

pmi, MF Global's need to increase its capital by hundreds of millions of dollars to meet its 

obligations related to the RTMs. 

45. As a result, MF Global's CFO was tasked with considering whether secured 

customer funds (intended for foreign trading) that exceeded the minimum balance determined by 

the alternative calculation (as described above in paragraph 24) could be used, along with excess 

segregated funds, for overnight funding ofthe Firm's operations. Even though she concluded 

that the law at the time permitted such use of secured customer funds, MF Global's CFO 

recommended a more conservative approach for purposes of protecting customer funds to [tvoid 

a situation where the Firm was unable to meet obligations to all of its foreign futures customers. 

The conservative approach, which the Film adopted as its policy, required that the Fi1m not use 

the secured customer funds that exceeded the minimum balance determined by the alternative 

calculation for overnight funding of the Fi1m's operations unless the Firm had on hand a 

sufficient balance of excess funds (i.e., proprietary funds) in customer segregated accounts to 

cover its use of such secured customers funds. For example, the policy contemplated that if the 

Film had on hand $400 million in excess segregated funds, then the Firm could use up to $400 

million of secured customer funds for its own proprietary purposes. But, if the Firm used more 

than $400 million of such, secured customer funds, then the policy was violated. 

46. Under the Firm's policy, in order to calculate the amount of secured customer 

funds that could be used overnight for Film purposes, the Firm combined the balance of the 

excess funds in the customer segregated accounts with the available amount of funds in the 

customer secured accounts calculated under the NL V method. This combined amount was 

referred to as "Available FCM Cash" (also refened to in this Complaint as "FCM Excess Cash") 

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and was included as a line item on the daily liquidity report circulated to Corzine and others. A 

negative combined balance signified that the Firm had, at minimum, used for proprietary 

purposes· more secured customer funds than it held in excess segregated funds and thus had 

violated the Firm's policy. In other words, the policy required that Available FCM Cash be 

maintained at a positive balance. For example, ifMF Global started the day with $400 million of 

proprietary nmds in customer segregated accounts and $200 million of proprietary funds in 

customer secured accounts, and then used $700 million from the customer secured accounts for 

Firm purposes, then the Available FCM Cash would be negative $100 million, signifying a 

policy violation [$400 million+ ($200 million - $700 million) = -$100 million]. This policy was 

communicated at the time to Corzine and O'Brien, among others. 

D. In October 2011, MF Glolbal Was "Skating on the Edge" as Liquidity Stresses 

Increased the Firm's Need for Cash and the Firm Relied on Funds Held in 

Customer Accounts 

47. In October 2011, Corzine and other officers and employees recognized that MF 

Global faced significant liquidity stresses arising from the Firm's margin obligations and other 

factors. 

48. For example, on Thursday, October 6, 2011, members of senior management 

were concerned about the Firm's liquidity and ultimate viability. O'Brien, her supervisor, 

Holdings' Global Treasurer, and others discussed on a recorded telephone line that the Finn 

expected to have to make a margin payment of $50 million to $75 million the next day for MF 

Global's RTMs. They agreed that this margin obligation would have to be paid from FCM 

Excess Cash because the Firm had no other readily available source of cash that could cover that 

amount. At the time, the FCM Excess Cash balance was approximately $80 to $100 million. 

Holdings' Global Treasurer expressed concern that even without the stress of this margin call, 

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the Film was facing the loss of liquidity and that it was "skating on the edge" without "much ice 

left." 

49. In October 2011, the Firm had access to an approximately $1.2 billion line of 

credit through an unsecured revolving credit facility (the "revolver" or "RCF") administered by 

JPMorgan Chase Bank, N.A. ("JPM" or "Chase"). Corzine wanted to avoid using the revolver in 

part to avoid giving the appearance that the Firm needed to borrow money and therefore was in 

financial trouble. On October 6, 2011, in response to the Firm's liquidity stresses, Corzine told 

an MF Global Treasury Department employee that they were going to do all the things they 

could do to not di'aw on the revolver the next day, even if that meant "go[ing] negative" in the 

FCM customer accounts. Corzine knew that "going negative" in the FCM customer accounts 

would be a violation ofFitm policy. 

50. In another recorded conversation on October 6, the Global Treasurer relayed to 

Holdings' CFO and another MF Global employee ("Employee #1 ")that he had told Corzine that 

the Firm's liquidity "situation" was "not sustainable" and that "the situation is grave." Later 

during this conversation, the Global Treasurer stated that "we have to tell Jon that enough is 

enough. We need to take the keys away from him." Corzine disparagingly nicknamed the 

Global Treasurer "the Gravedigger." 

51. The evening of October 6, Corzine received an email fi:om Holdings' CFO that 

detailed the financial stresses on the Film. In the email, Holdings' CFO told Corzine that "[o]f 

most concern, is the sustained levels of stress and the lack of signs that this will reduce soon." 

Holdings' CFO identified MF Global's three sources ofliquidity: (1) cash from its subsidiary, 

MF Global Finance USA, Inc. ("Finco"); (2) FCM Excess Cash; and (3) MF Global's brokerdealer division. Holdings' CFO warned Corzine that the Film was becoming overly reliant on 

17 
the cash in the FCM customer accounts because the other two sources of liquidity were 

insufficient: "the situation of our broker~dealer [is] that [it] is currently unable to fund itself, and 

more woiTying continues to need more cash than we have in finco [sic], thereby having us dip 

into FCM excess every day." 

52. The next day, October 7, 2011, Corzine remained detetmined to squeeze the MF 

Global's customer segregated accounts and customer secured accounts for cash. In a recorded 

conversation with another MF Global employee ("Employee #2"), Corzine pronounced: "We 

need to go through what that real number is at the FCM. You know, what's the drop dead 

amount. ... You know, I'm sure there is a buffer in her thinking. We've got to find out what 

that is so that we have some ability to think about pulling it if we have to. Obviously, keep me 

posted." 

53. By October 17,2011, Corzine was infmmed that, on the prior business day, 

October 14, 2011, the Firm had used approximately $70 million more than what was available of 

actual FCM Excess Cash for Film purposes, which was a violation of the Firm's policy. That 

same day, he received an email from Holdings' CFO observing that, in addition to havingused 

the $70 million for Firm purposes on October 14, the Film had also used approximately $16 

million more than what was available of actual FCM Excess Cash for Firm purposes on October 

17, another violation of the Firm's policy. 

54. As a result of these events, the next day, on October 18, 2011, the Global 

Treasurer told O'Brien and other members of the Film in a recorded conversation that senior 

management decided that the Firm would no longer use cash from the FCM, even excess cash, to 

fund the broker-dealer's needs. 

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55. Also on October 18, when Corzine was told on a recorded line that the Global 

Treasurer had an interest in "tapping the revolver," Corzine agreed that the revolver should be 

used as a source of liquidity, acknowledging the problems from relying on FCM Excess Cash: 

"yes ... we have no buffer, no room for mistake ... we already ended up getting close yesterday 

by using the FCM." Thus, on October 18, 2011, Holdings drew $125 million from the revolver 

to meet the Firm's increasing liquidity demands. 

56. On October 19, 2011, Corzine received a repmi which showed that, despite the 

decision that cash from the FCM would no longer be used as a liquidity source, on October 18, 

2011, the Firm had used approximately $55 million more than what was available ofFCM 

Excess Cash, in violation of the Firm's policy. This was the third day in a row that Corzine 

received information that the Firm had violated its policy with regard to using funds from the 

FCM customer accounts. 

57. Despite repeated warnings about the liquidity crisis, and despite his knowledge of 

the deficiencies in MF Global's systems and controls, Corzine did not take sufficient steps to 

ensure that the Firm's daily draws of cash from FCM customer accounts did not result in an 

unlawful use of customer funds. 

E. Liquidity Stresses Intensified During the Last Week of October 2011 

58. On Monday, October 24, 2011, credit rating agency Moody's Investor Services, 

Inc. ("Moody's") downgraded its rating of Holdings' credit. Such credit downgrades can have a 

prompt negative impact on a firm's ability to borrow money to finance its operations and can 

quickly increase bono wing costs. Often, such downgrades prompt a firm's trading 

counterparties to demand additional collateral. All of this happened at MF Global in the last 

week of October 2011. 

19 
59. Holdings, a publicly traded firm, made quarterly public announcements of its 

eamings on regularly scheduled dates. For the quartei' ending September 30, 2011, Holdings 

accelerated the timing ofthe announcement of its quarterly earnings to the moming of Tuesday, 

October 25, 2011. On that day, Holdings announced net losses of over $191 million for the 

quarter. 

60. As a result of the rating agency downgrade and the negative earnings report, MF 

. Global experienced increased and significant liquidity demands, as (a) customers increasingly 

demanded return of funds from MF Global, (b) clearing organizations and counterparties 

increased margin calls on MF Global's proprietary trading positions, such as its RTMs, and (c) 

counterpa1iies unwound transactions with MF Global, requiring MF Global to use cash for 

settlement 

61. On Monday, October 24 and Tuesday, October 25, 2011, the Film drew another 

$530 million from the revolver. Thus, by October 25, the Firm had drawn a total of $897 

million, or roughly 75% of the revolver's limit, leaving $303 million available to draw, which 

was not enough to meet the Firm's ensuing cash requirements. 

F. MF Global Unlawfully Used Customer Segregated Funds 

for the Firm's Own Purposes 

Customer Segregated Funds' Deficiencies on Wednesday, October 26, 2011 

62. On Wednesday, October 26, 2011, MF Global became under-segregated, with a 

deficiency by the close of business of over $298 million in its customer segregated accounts. 

MF Global did not make the required immediate reports to the CFTC and the CME of the 

customer segregated account deficiency. The following events, among others, occuned on 

October 26: 

20 
a. Corzine and Holdings' senior management requested that the remaining 

$303 million of the revolver be drawn. Corzine and O'Brien both understood that 

thereafter the revolver was no longer a source of liquidity for the Firm. 

b. O'Brien received a segregation repmi showing that, as of the end of the 

prior business day (Tuesday, October 25), MF Global held almost $300 million of excess 

segregated funds. Corzine received an email with an attachment listing this amount of 

"excess segregation." 

c. O'Brien and her staff directed, approved, and/or caused transfers totaling 

more than the excess funds- over $500 million- from MF Global's customer segregated 

accounts to the Film's proprietary accounts. These funds were used to help meet the 

Firm's liquidity needs, including payments to its broker-dealer customers. These 

transfers included customer segregated funds. 

d. O'Brien and her staff in MF Global's Treasury Depatiment directed, 

approved, and/or caused funds to be transfened from customer segregated accounts at the 

request ofMF Global's broker-dealer staff. O'Brien understood that any use of customer 

segregated funds was unlawful, even if these customer funds were later retumed to the 

segregated accounts. At approximately 6:00p.m. ET, O'Brien told broker-dealer staff in 

an email that she needed them to retum funds from MF Global proprietary accounts at the 

Banlc ofNew York Mellon ("BONY") to customer segregated accounts "ASAP," and 

that they could not afford a "SEG issue." BONY was one ofMF Global's primary banks, 

housing customer segregated accounts as well as MF Global proprietary accounts, among 

other Film accounts. 

21 
e. Just prior to 6:30p.m. ET, O'Brien told Employee #2 on a recorded 

telephone line that the Film would not be in compliance with customer segregation mles 

because funds were not being returned to customer segregated accounts: 

O'BRIEN: It is a total clusterfuck .... They have to move half a 

billion dollars out of BONY to pay me back .... Tell me 

how much money is coming in and I will make sure it gets 

posted. But if you don't tell me, then tomorrow morning I 

am going to have a seg problem .... I need the money 

back from the broker-dealer I already gave them. I can't 

afford a seg problem. 

f. At approximately 6:45p.m. ET, O'Brien also told Employee #2 on a 

recorded telephone line that she was "on the phone with [BONY] trying to negotiate 

something right now. Otherwise we are going to be underseg." 

g. 0 'Brien was able to get a pmiion of the customer segregated funds 

returned to customer segregated accounts, as BONY agreed to transfer $325 million of 

funds from MF Global's proprietary operating account at BONY to a customer 

segregated account that MF Global maintained at BONY. 

h. O'Brien was aware that, as of the time of this BONY transfer, MF Global 

had been unlawfully under-segregated during the day. Even with the $325 million 

transfer back to a customer segregated account, MF Global remained under-segregated. 

1. At approximately 11:30 p.m. ET, referring to transfers from customer 

segregated accounts to MF Global's broker-dealer division, O'Brien sent an email to an 

MF Global employee titled "Heads up my projection," which stated: "Due to large BID 

client wires we could be negative seg tomorrow AM." 

Customer Segregated Funds' Deficiencies on Thursday, October 27, 2011 

63. On Thursday, October 27, 2011, MF Global was under-segregated with a 

deficiency by the close of business of over $413 million in its customer segregated accounts. 

22 
MF Global did not make the required immediate reports to the CFTC and the CME of the 

customer segregated account deficiency. The following events, among others, occmTed on 

October 27: 

a. At approximately 12:39 a.m. ET, O'Brien emailed a liquidity report to 

Corzine and other senior management stating that the FCM had $0 (zero) of liquidity on 

hand at the FCM as ofWednesday, October 26, and expected to have $0 (zero) of 

liquidity on hand as of Thursday, October 27. Corzine and O'Brien understood that this 

meant there was no FCM Excess Cash available for MF Global to use for the Firm's 

proprietary purposes. 

b. At approximately 1:00 a.m. ET, one of O'Brien's staffin the Treasury 

Department sent her an email stating that having a "positive seg balance in the am are 

[sic] all we can hope for. I think we need to be rather careful of that going forward." 

c. At approximately 8:00a.m. ET, Corzine was informed in an email marked 

urgent that, as of7:15 a.m. ET on Thursday, the Firm needed $365 million to use for 

proprietary purposes, driven in large part by margin calls on the RTM positions and 

demands for cash to use in suppotiing or unwinding repurchase transactions. 

d. MF Global relied on short-term extensions of credit from banks, such as 

BONY and JPM, acting like middlemen between MF Global and counterparties, to 

"clear" its proprietary securities transactions that it needed to conduct to raise cash. But, 

at least as of the last week of October 2011, the banks were increasingly concerned about 

extending credit to MF Global without sufficient collateral and were becoming less 

comfortable clearing for MF Global because ofMF Global's deteriorating finandal 

situation. On the afternoon of October 27, Corzine spoke to Employee #1 on a recorded 

23 
telephone line to strategize how they could use customer segregated funds to induce JPM 

to clear MF Global's trades more quickly: 

Corzine: We have a money management account at Chase, if my memory 

serves me. 

Employee # 1: Yeah, it's the JP Morgan Trust account, but that's cash seg for 

clients ~- it has nothing to do with greasing our wheels for Chase to 

move. 

Corzine: I understand but you put it in a tri-party, and then once the 

securities have started moving, then you move it back to the, urn ~-' 

this is the same thing we did last night, they left it in the tri-party, 

the seg money. 

e. Corzine pmiicipated in a Board of Directors meeting in which the Board 

was informed that the Firm's margin obligations were growing and its credit rating was 

likely going to be downgraded further, below investment grade, that day. Corzine 

understood that the ratings downgrade would trigger increased margin calls and other 

demands on liquidity. 

f. Corzine and O'Brien received documents reflecting that, as of the close of 

the prior business day (Wednesday, October 26), the Firm's excess funds in customer 

segregated accounts totaled approximately $116 million, and the overall FCM Excess 

Cash (combining segregated and secured balances) was negative $341 million. The 

negative figure signaled that the Firm had once again violated Firm policy. 

g. Actually, the true customer segregated balances were even lower than 

reflected on the documents sent to Corzine and O'Brien, because $415 million in wire 

transfers from customer segregated accounts had not been properly recorded on 

Wednesday, which meant that MF Global's customer segregated accounts, in fact, were 

under-segregated by more than $298 million. 

24 
h. For example, O'Brien learned during the day on Thursday that a 

booldceeping error that had occurred on Wednesday, October 26, resulted in the customer 

segregated account balance reflected on the segregation report for as of Wednesday as 

being overstated by at least $165 million. 

1. On Thursday, despite knowing that MF Global's customer segregated 

accounts were already under-segregated or would become under-segregated as a result of 

the transfer, O'Brien directed, approved, and/or caused improper transfers from customer 

segregated accounts totaling hundreds of millions of dollars. 

J. O'Brien and her staff directed, approved, and/or caused the transfer of at 

least $525 million from customer segregated accounts to the Firm's proprietary accounts. 

For example, these transfers included a $325 million transfer from a customer segregated 

account at BONY to a proprietary account and an additional $200 million transfer from a 

customer segregated account at JPM to a proprietary account. 

k. Before BONY pe1mitted the $325 million transfer, it inquired ofMF 

Global broker-dealer staff by email whether the transfer would comply with CFTC 

Regulations if the $325 were moved to a Film account. O'Brien replied to BONY by 

email that the $325 million were "not required to be segregated intra-day under CFTC or 

SEC rules." She deliberately did not copy other MF Global Treasury Department 

employees on her email response to BONY because, as she explained to one of her 

colleagues in the Treasury Department on a recorded telephone line: "I don't want to take 

anyone down with me." 

1. O'Brien knew that the $325 million transfer would cause a deficiency of 

customer segregated funds in the customer segregated accounts because she had 

25 
previously been informed that MF Global's customer segregated accounts had only $116 

million of excess segregated funds. O'Brien knew that MF Global was required to have 

sufficient customer segregated balances at all times, including intra-day. 

m. O'Brien futiher knew that the additional $200 million transfer refened to 

in paragraph 63j above was an improper use of customer segregated funds since she had 

directed, approved, and/or caused this transfer after she approved the $325 million 

transfer and after she had received information that the customer segregated accounts 

held only $116 million in excess segregated funds as of the beginning of the day. 

n. O'Brien asked MF Global broker-dealer staff for the return of 

approximately $815 million that previously had been transfened from customer 

segregated accounts and customer secured accounts to the Firm's proprietary accounts. 

Only approximately $525 million was returned to customer segregated accounts that day. 

o. Corzine was aware of the worsening liquidity crisis and the need for cash 

to satisfY the firm's liquidity obligations. For example, at approximately 6:30p.m. ET, 

Employee #2 told Corzine on a recorded telephone line, "Edith thinlcs we are not in a 

significant excess cash position." Corzine replied, "It would be very dangerous if we are 

not." 

p. Corzine was aware, at least as ofthat night, that MF Global's expected 

sources of available cash had not yet materialized or were restricted. For example, he 

was told that JPM was not timely releasing cash to MF Global from a secured credit 

facility (the "secured revolver"), and that JPM and BONY were restricting MF Global's 

access to its cash and/or collateral held at those banlcs because ofMF Global's credit 

problems. 

26 
q. At approximately 8:45 p.m. ET, Employee #2 told Corzine on a recorded 

telephone line that some of the funds O'Brien had transfened fi'om the FCM to help 

satisfy MF Global's proprietary obligations had not been returned. Corzine asked if she 

had received back "enough to be in compliance," and the employee responded, "no, 

she['s] indicating she's net short $106 million." Corzine thereafter instructed the 

employee to "raise hell" with JPM to obtain funds from the secured revolver to "cover 

up" the gap left by transfers of funds that were not returned. Corzine did not receive 

assurances that the funds were returned. 

r. In recorded telephone calls that evening, Corzine and others discussed the 

Firm's assets in anticipation of presenting such infmmation to the Federal Reserve Bank 

ofNew York and JPM, who were making inquiries about the Fitm's financial condition 

and viability. At least by the end ofthese calls, Corzine knew that the Firm had $82 

million in cash that could be used immediately, but not more than that. He also knew that 

the Firm had $602 million of less liquid or restricted assets, namely assets consisting of: 

(i) $144 million worth of securities held at The Depository Trust Company; (ii) $214 

million worth of securities held at JPM; (iii) $169 million in the fmm of a loan from the 

secured revolver that it was expecting from JPM but that JPM had not yet credited to its 

accounts; and (iv) $75 million in cash that BONY was holding to facilitate the Film's 

securities transactions. Corzine knew that various encumbrances and impediments on 

these $602 million wmih of assets made them not immediately available for the Film to 

use to meet its cash needs. In fact, aclmowledging that these assets were restricted or not 

as liquid as cash, Corzine, in a recorded conversation, refe1Ted to them euphemistically as 

the "moral equivalent" of cash. 

27 
s. Corzine failed to investigate and conect any deficiencies in customer 

segregated funds or secured customer funds or Firm policy violations, or to halt or 

examine futiher transfers of cash from customer segregated and customer secured 

accounts for proprietary purposes. 

t. MF Global filed with both the CFTC and the CME a false segregation 

report for the end of the day on Wednesday, showing excess segregated funds in the 

amount of $116,164,132 when, in fact, the Firm was under-segregated by over $298 

million, 

Customer Segregated Funds' Deficiencies on Friday, October 28, 2011 

64. On Friday, October 28, 2011, MF Global was under-segregated with a deficiency 

by the close of business of approximately $900 million in its customer segregated accounts. MF 

Global did not make the required immediate reports to the CFTC and the CME of the deficiency 

in the customer segregated accounts. The following events, among others, occuned on Friday, 

October 28: 

a. At or about 2:11a.m. ET, a JPM Vice Chairman in the investment banking 

department sent an email to JPM's Chief Risk Officer stating that "by the way, MF 

expects to have approx. $82mm (that's not a typo) in free cash in the U.S. at the start of 

business tomonow." 

b. At or about 6:24a.m. ET, Corzine leamed that LCH made a margin call 

on the Firm for over $200 million related to RTM positions. Corzine understood that MF 

Global was obligated to make this payment for the margin call. 

c. · At or about 7:00a.m. ET, Corzine patiicipated in a telephonic meeting of 

Holdings' Board of Directors, in which the Bom·d was informed that MF Global's 

liquidity situation had deteriorated overnight, in pati, because the clearing banks were 

28 
refusing to release MF Global's cash and other collateral. The Board was also informed 

during this meeting that MF Glo ballacked sufficient cash to meet the liquidity demands 

that were expected that day and that, without the ability to obtain additional cash, the 

Firm would have to file for bankruptcy. 

The Firm Transferred Funds ft·om Customer Segregated Accounts 

To Satisfy Its Overdrafts 

d. MF Global tried to raise cash by attempting to sell securities, unwind 

positions, and auction assets. Corzine was personally involved in these eff01is. To 

engage in these critical transactions, however, MF Global needed JPM's help. 

e. Shotily after midnight in New York (i.e. early Friday moming), Corzine 

leamed from Holdings' CFO and COO that MFGUK accounts held at JPM's London 

branch were overdrawn. 

f. JPM informed Corzine that before JPM would assist the Firm with 

unwinding its portfolio or auctioning assets, JPM would require MF Global to first 

transfer funds to JPM to cover the overdrafts. Corzine, who understood that MF Global's 

liquidity problems would worsen without JPM's assistance, quickly assured JPM that the 

overdrafts would be satisfied. 

g. At approximately 8:30a.m. ET, Corzine received an email from JPM 

detailing twelve accounts that were overdrawn. The total sum of the overdrafts listed in 

the email was over $134 million. 

h. At approximately 9:00a.m. ET, Corzine instructed O'Brien to transfer 

funds to pay for the overdrafts. Corzine told O'Brien that it was "the most impotiant 

thing she can get done that day." Corzine askedno questions to ascertain how O'Brien 

would find funds to pay for the overdrafts, notwithstanding his knowledge of the Firm's 

29 
extremely limited sources of cash. Nor did Corzine inquire of 0 'Brien how the Finn 

would fund its other needs for cash that day. 

1. At 9:26a.m. ET, O'Brien informed Corzine that she was transferring $175 

million to MFGUK to pay for the overdrafts. O'Brien completed that transfer in two 

steps: first, a $200 million transfer fi:om a customer segregated account at JPM to an MF 

Global proprietary account at JPM; and second, a $175 million transfer from that 

proprietary account at JPM to an MFGUK account at JPM, which then was used to cover 

the overdrafts. As O'Brien explained to a colleague from MFGUK the next day on a 

recorded telephone line: "the only place I had the 175 million, ok, was in seg." O'Brien 

also commented during this conversation that she "move[ s] money all th~ time ... from 

seg over to house and house over to the BD [broker-dealer] .. OK, that's what we do all 

the time because we don't have enough capital. .. " 

J. Shortly after 1:00 p.m. ET on Friday, O'Brien was informed by the same 

MFGUK colleague that MFGUK might not be in a position to retum the $175 million 

that O'Brien had sent to them earlier that day. O'Brien responded that that "leaves us 

with a problem- a big problem." 

JPM Asked Corzine for Written Assurances that the Transfers 

Covering the Overdrafts Complied with CFTC Regulations 

k. JPM soon realized that the funds transferred to satisfy the overdrafts 

originated from a customer segregated account. Shmily before 2:00p.m. ET on Friday, 

October 28,2011, JPM's Chief Risk Officer told Corzine that JPM wanted written 

assurances (the "JPM letter") that the transfers, among others, complied with CFTC 

Regulations. JPM' s Chief Risk Officer told Corzine in substance, among other things, 

30 
that JPM was seeking assurances because the payment had been accomplished through 

two transfers, one of which had come from a customer segregated account. 

1. Corzine contacted O'Brien with respect to JPM's inquiry. O'Brien then 

emailed Corzine documentation for the $175 million transfer from MF Global's 

proprietary account to MFGUK, but not for the original transfer from the customer 

segregated account. Other than his communications with O'Brien, Corzine took no 

further steps to inquire or investigate whether funds had been transfened from customer 

segregated accounts to satisfy the overdrafts. 

m. At approximately 2:28p.m. ET, JPM emailed Corzine the JPMletter for 

MF Global's signature to confirm the lawfulness of the transfers from the customer 

segregated account. Corzine forwarded the JPM letter to Holdings' GC to have it signed. 

Holdings' GC forwarded the letter to O'Brien and to MF Global's Associate General 

Counsel, who was also MF Global's ChiefU.S. Regulatory Counsel (the "AGC"). The 

letter canied a signature line for O'Brien. 

n. At approximately 4:30p.m. ET, Employee #2 told Corzine on a recorded 

telephone line that he spoke to personnel at MFGUK regarding whether MFGUK would 

be able to return the $17 5 million that had been used to pay for the overdrafts. The 

employee told Corzine, "I don't think that situation is going to be resolved, I think 

[MFGUK is] going to have a fail there." Corzine responded, "we really, really can't have 

that." 

o. The next day, Saturday, October 29, 2011, O'Brien stated on a recorded 

telephone line that she told the AGC on Friday that she did not want to sign the JPM 

31 
letter. She also told the AGC during this conversation, among other things, that "no one 

has paid me back the money, I think we're underseg." 

p. No one from MF Global, including O'Brien, ever signed the JPM letter. 

q. Notwithstanding the request from JPM, Corzine did not direct Holdings' 

GC or anyone else to determine whether customer segregated funds had been used to 

cover the overdrafts. Corzine also failed to halt multiple subsequent transfers of funds 

fi:om customer segregated accounts that were made for proprietary purposes. Corzine 

failed to implement any controls or take any steps to ensure that customer segregated 

funds were not and would not be unlawfully used. 

O'Brien Directed, Approved, and/or Caused Multiple Unlawful Transfers 

from Customer Segregated Accounts 

r. As alleged above, based upon O'Brien's knowledge: a) that the 

segregation repoti for as of Wednesday was overstated by at least $165 million, and thus . 

that the true customer segregated account balances were deficient for that day; and b) of 

the volume of transfers from the customer segregated accounts on Thursday, O'Brien 

knew that MF Global was under-segregated as the stati of the day on Friday. Between 

approximately 11:00 a.m. and 12:00 p.m. ET on Friday, O'Brien's knowledge was 

futiher confitmed when she learned that MF Global's segregation calculation as of the 

end of the prior business day (the Thursday seg calculation) showed that MF Global was 

tmder-segregated by hundreds of millions of dollars. Nevetiheless, O'Brien directed, 

approved, and/or caused multiple transfers of funds from customer segregated accounts to 

the Firm's proprietary accounts throughout the day on Friday totaling hundreds of 

millions of dollars- far more than the Firm had in excess funds, as O'Brien well knew. 

These transfers included not only the Friday morning transfer of $200 million in 

32 
connection with the JPM overdrafts as alleged above, but also additional transfers of 

$62.5 million, $2 million, $135 million, and $50 million. 

s. O'Brien directed her staff to consult with MF Global's Regulatory 

Reporting Department to deal with the deficiency in the segregation calculation. 

Thereafter, a member of O'Brien's staff in MF Global's Treasury Depatiment asse1ied 

that there should be a manual $540 million upward adjustment to the segregation repmi 

to reflect a credit in that amount to the customer segregated accounts. The proposed 

adjustment was in fact unjustified. Although O'Brien's staff did not provide any 

documents to justify the adjustment, the Regulatory Repmiing Department accepted the 

assertion and made a manual adjustment to the segregation report, erroneously increasing 

the reported balance of the customer segregated accounts as of Thursday by $540 million. 

t. O'Brien knew that the transfers from customer segregated accounts that 

day were unlawful. At about 6:00p.m. ET in a recorded telephone call, O'Brien told 

Employees #1 and #2 that at least $530 million had been transferred from FCM customer 

segregated accounts and that it could be "game over" unless at least $355 million was 

returned: 

O'Brien: Okay, so it's 249.5 today, it's 106 from, from Wednesday, 

actually, you guys, okay? Okay. 355. Okay. So, let's just 

be delirious and think [the broker-dealer division] ha[s] 

more than 355. Okay? If they have· it, I need it, and let me 

tell you why. Shh. London failed to me on returning the 

175 I pushed out to them this morning. Okay? That cou~d 

be game over, you guys. 

Employee #2: From a regulatory perspective? 

O'BRIEN: Yep. Yep, it could be. 

* * * 

Employee #1: You need the 530 million bucks. 

33 
O'BRIEN: Yep. I don't care where you get it, quite frankly. If you 

can get 530 million dollars, I'm putting it back in the seg 

pool. Okay? I can maybe get by with this 175, but I can't 

get by without the whole 355, you guys. 

u. As ofthe close of business on Friday, only $177.5 million was returned to_ 

customer segregated accounts. 

v. By 6:30p.m. ET, Corzine was told that the broker-dealer division had 

used significant sums of FCM funds during the day that had not been returned to the 

FCM. Employee #2 told Corzine that that the Firm was not in a position "to pay Edith 

... err. .. the FCM back for the 355 million that they [i.e., the FCM] lent us intraday." 

Notwithstanding this infmmation, Corzine did not direct anyone to detetmine whether 

MF Global was under-segregated. 

w. On Friday, MF Global filed with both the CFTC and the CME a false 

segregation report for the end of the day on Thursday, showing excess customer 

segregated funds of over $200 million when, in fact, MF Global was under-segregated by 

hundreds of millions of dollars. 

G. MF Global Continues To Fail To Notify the CFTC and the CME of the Deficiency 

in Customer Segregated Accounts Over the Weekend of October 29-30,2011 

65. MF Global's AGC testified that, when he spoke with O'Brien on Saturday 

evening, October 29, regarding the JPM letter, he asked her whether the customer segregated 

accounts had been "topped off' throughout the day on Friday, [i.e., whether they had sufficient 

funds to satisfy MF Global's legal requirements], and O'Brien did not respond. The AGC 

further testified that he believed that the plausible reason for O'Brien's silence was that the 

customer segregated accounts had not been "topped off' all day on Friday. 

66. At about 12:45 p.m. ET on Sunday, October 30, 2011, the head ofMF Global's 

Regulatory Reporting Depatiment emailed the AGC, Holdings' GC, and others a segregation 

34 
report showing a $952 million deficit in the customer segregated accounts and indicating that 

they were looking for an adjustment that would eliminate the deficit. 

67. · Around 3:30p.m. ET on Sunday, October 30,2011, CFTC staff emailed the 

AGC, O'Brien, and the head ofMF Global's Regulatory Reporting Department that the CFTC 

still had not been provided with MF Global's October 28 segregation report as promised. 

68. Around 3:40p.m. ET on Sunday, October 30, 2011, CFTC staff emailed the 

AGC, Holdings' GC, O'Brien, and the head ofMF Global's Regulatory Reporting Department 

that "the lack of data is driving adverse inferences. We really need this information (i.e., the 

October 28 segregation report), and then underlying support, immediately and very shortly 

indeed." 

H. MF Global and Co:rzine Failed to Supervise Diligently 

the Activities of Thei:r Officers, Employees, and Agents 

69. Corzine was aware that that the Firm, through its officers, employees, and agents, 

was transfetring funds from MF Global's customer segregated accounts without having 

sufficient capability to determine, in real time, the portion of the account balance that represented 

excess segregated funds that the Firm was permitted to use for its own purposes, as distinct from 

customer segregated funds, which the Finn was not permitted to use. 

70. Among other things, Corzine also was aware, at the time when funds were 

transferred from the customer segregated accounts, that: (a) the Firm had inadequate controls and 

systems with regard to liquidity management and regulatory reporting; (b) MF Global was 

experiencing a liquidity crisis, which had worsened during the last week of October; (c) JPM 

sought written assurances that the transfer of hundreds of millions of dollars from MF Global's 

customer segregated accounts was in compliance with CFTC Regulations; and (d) as described 

below in paragraph 71, MF Global had previously violated Firm policy by using more than what 

35 
was available ofFCM Excess Cash from the customer segregated and customer secured accounts 

to satisfy the Film's proprietary liquidity needs. Additionally, Corzine Jrnew on Friday morning 

that MF Global had transferred $175 million to MFGUK even though he thought MF Global had 

immediate access to only $82 million in proprietary cash. He fmiher learned from JPM shortly 

before 2:00 p.m. ET on Friday that the funds were used to pay the overdraft referred to in 

paragraph 64 above and were in fact transferred from a customer segregated account. 

71. Corzine lrnewthat MF Global's own policy regarding the use ·ofFCM Excess 

Cash was repeatedly violated to meet the liquidity demands on the Firm. In October 2011 alone, 

MF Global had violated its policy on at least five business days. Yet, Corzine did not take 

sufficient steps in response to ensure that proper controls were established and implemented to 

prevent any further violation of a Firm policy that was designed to protect customer funds. 

I. Holdings Controlled the Operations ofMF Global 

72. Holdings was the parent company and sole shareholder, directly or indirectly, of 

MF Global and controlled the operations ofMF Global. Holdings' control ofMF Global's 

activities included that: 

a. Holdings' senior management was responsible for the supervision, hiring, 

firing, and/or disciplining ofMF Global employees; 

b. MF Global and Holdings shared th~ same offices; 

c. MF Global was capitalized by Holdings; 

d. Holdings determined the business activities and priorities ofMF Global; 

e. Holdings helped detetmine how funds held in MF Global FCM customer 

accounts would be used for the liquidity needs ofMF Global and of Holdings' other 

subsidiaries; 

36 
f. Holdings bonowed money through its RCF and passed along the 

bonowings to MF Global; 

g. MF Global employees, including Corzine, held titles both at MF Global 

and Holdings, and individuals at MF Global and Holdings shared responsibilities; 

h. Holdings designed the investment management agreement that governed 

the structuring ofMF Global's investments in the RTMs facilitated by MFGUK, and 

Holdings appmiioned the revenue from these transactions among MF Global and 

MFGUK; 

1. Holdings' Board of Directors made determinations about the permissible 

size and parameters ofMF Global's investments in RTMs; and 

j. The Internal Audit Department of Holdings, as well as MF Global's 

independent auditor, the broker-dealer's designated examining authority, and the CME, 

regularly reported the results of audits relating to MF Global's functions to the Board of 

Directors and/or senior management of Holdings. 

V. VIOLATIONS OF THE COMMODITY EXCHANGE ACT 

AND CFTC REGULATIONS 

COUNT ONE 

VIOLATIONS OF SECTION 4d(a)(2) OF THE ACT 

AND CFTC REGULATIONS 1.20, 1.22, 1.23, and 1.25 

FAILURE TO SEGREGATE AND MISUSE OF CUSTOMER FUNDS 

BY DEFENDANTS MF GLOBAL, HOLDINGS, CORZINE, AND O'BRIEN 

73. Paragraphs 1 through 72 are re-alleged and incorporated herein by reference. 

74. · Section 4d(a)(2) of the Act, 7 U.S.C. § 6d(a)(2), requires an FCM to treat and deal 

with all customer money, securities, and property as belonging to such customers and to account 

separately for such money, securities, and prope1iy. Section 4d(a)(2) of the Act fmiher prohibits 

37 
an PCM from: commingling customer money, securities, and propetiy with its own funds; using 

customer money, securities, and property to margin or guarantee the trades or contracts of any 

customer or person other than those for whom the same are held; and/or using customer money, 

securities, and property to secure or extend the credit of any customer or person other than those 

for whom the same are held. 

75. CPTC Regulation 1.20, 17 C.P.R. § 1.20, requires that all customers' funds be 

separately accounted for, properly segregated, and treated as belonging to such customers, and 

not commingled with the funds of any other person. 

76. CPTC Regulation 1.22, 17 C.P.R. § 1.22, prohibits an PCM from using, or 

permitting the use of, the funds of one futures customer to purchase, margin, or settle the trades, 

contracts, or commodity options of, or to secure or extend the credit of, any person other than 

such futures customer [i.e., for the benefit of any person other than such futures customer]. 

77. CPTC Regulation 1.23, 17 C.P.R. § 1.23, prohibits an PCM from withdrawing 

customer segregated funds beyond its actual interest therein, which would result in the funds of 

one futures customer being used for the benefit of any person other than such futures customer. 

78. CPTC Regulation 1.25, 17 C.P.R. § 1.25, requires that PCMs manage the 

investment of customer funds "consistent with the objectives of preserving principal and 

maintaining liquidity," and in accordance with further restrictions. 

79. During the last week of October 2011, MP Global violated Section 4d(a)(2) of the 

Act, 7 U.S.C. § 6d(a)(2), and CPTC Regulations 1.20, 1.22, and 1.23, 17 C.P.R. §§ 1.20, 1.22, 

and 1.23, and from at least January 2011 until May 2011, MP Global violated CPTC Regulation 

1.25, 17 C.P.R. § 1.25, by failing to treat, deal with, and account for its PCM customers' 

segregated funds as belonging to such customers; failing to account separately for, properly 

38 
segregate, and treat its FCM customers' segregated funds as belonging to such customers; 

commingling its FCM customers' segregated funds with the funds of any other person; using its 

FCM customers' segregated funds.to fund the operations ofMF Global and its affiliates, thereby 

using or pennitting the use of the funds of one futures customer for the benefit of a person other 

than such futures customer; withdrawing from its FCM customer segregated funds beyond MF 

Global's actual interest therein; and investing customer segregated funds in prohibited 

instruments. 

80. At all times relevant to this Complaint, Holdings was the parent company ofMF 

Global and controlled the operations ofMF Global, including the acts constituting the violations 

described in this Count One. Pursuant to Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(l)(B), 

and CFTC Regulation 1.2, 17 C.F.R. § 1.2, Holdings is liable for the violations described in this 

Count One as a principal of MF Global. 

81. During the last week of October 2011, Corzine directly and indirectly controlled 

MF Global and its employees and did not act in good faith or knowingly induced, directly or 

indirectly, the acts constituting the violations of Section 4d(a)(2) and CFTC Regulations 1.20, 

1.22, and 1.23 described in this Count One. Pursuant to Section 13(b) of the Act, 7 U.S.C. 

§ 13c(b ), Corzine is liable for the violations of Section 4d( a)(2) of the Act and CFTC 

Regulations 1.20, 1.22, and 1.23 described in this Count One. 

82. During the last week of October 2011, O'Brien willfully aided and abetted MF 

Global's wrongful conduct in violation of Section 4d(a)(2) of the Act and CFTC Regulations 

1.20, 1.22, and 1.23 as described in this Count One. Pursuant to Section 13(a) of the Act, 7 

U.S.C. § 13c(a), O'Brien is liable for the violations of Section 4d(a)(2) of the Act and CFTC 

Regulations 1.20, 1.22, and 1.23 described in this Count One. 

39 
83. Each illegal transfer of customer segregated funds out ofMF Global's FCM 

customer segregated accounts during the last week of October 2011, including, but not limited 

to, those specifically alleged herein, is alleged as a separate and distinct violation of Section 

4d(a)(2) ofthe Act, 7 U.S.C. § 6d(a)(2), and CFTC Regulations 1.20, 1.22, and 1.23, 17 C.F.R. 

§§ 1.20, 1.22, and 1.23. 

84. Each illegal investment of customer segregated funds in prohibited instruments, 

including, but not limited to, those specifically alleged herein, is alleged as a separate and 

distinct violation of CFTC Regulation 1.25, 17 C.F.R. § 1.25. 

COUNT TWO 

VIOLATIONS OF CFTC REGULATION 1.12(h) 

FAILURE TO REPORT UNDER~SEGREGATION 

BY DEFENDANTS MF GLOBAL AND HOLDINGS 

85. Paragraphs 1 through 84 are re-alleged and incorporated herein by reference. 

86. CFTC Regulation 1.12(h), 17 C.F.R. § 1.12(h), requires an FCM to report to the 

CFTC and the FCM's DSRO any deficiencies in customer segregated accounts or customer 

secured accounts immediately by telephone notice, and confirmed immediately in writing by 

facsimile notice, whenever the FCM knows or should lmow that the total amount of its funds on 

deposit in customer segregated accounts or customer secured accounts on behalf of customers is 

less than the total amount of such funds required by the Act and CFTC rules to be on deposit in 

customer segregated accounts or customer secured accounts. 

87. During the last week of October 2011, MF Global violated Regulation 1.12(h), 

17 C.F .R. § 1.12(h), by failing to notifY the CFTC and CME immediately when it knew or 

should have lmown of the deficiencies in its FCM's customer segregated accounts. 

40 
88. At all times relevant to this Complaint, Holdings was the parent company ofMF 

Global and controlled the operations ofMF Global, including the acts constituting the violations 

described in this Count Two. Pursuant to Section 2(a)(l)(B) of the Act, 7 U.S.C. § 2(a)(1)(B), 

and CFTC Regulation 1.2, 17 C.F.R. § 1.2, Holdings is liable for the violations described in this 

Count Two as a principal ofMF Global. 

89. During the last week of October 2011, each failure to report immediately to the 

CFTC and CME deficiencies in MF Global's FCM customer segregated accounts is alleged as a 

separate and distinct violation of CFTC Regulation 1.12(h), § 17 C.F.R. 1.12(h). 

COUNT THREE 

VIOLATIONS OF SECTION 6(c)(2) OF THE ACT 

SUBMISSION OF FALSE OR MISLEADING STATEMENTS 

IN A REPORT TO THE COMMISSION BY DEFENDANTS MF GLOBAL AND 

HOLDINGS 

90. Paragraphs 1 through 89 are re-alleged and incorporated herein by reference. 

91. Section 6( c )(2) of the Act, 7 U.S. C. § 9(2), makes it unlawful for any person to 

make any false or misleading statement of a material fact to the Commission, including any 

report filed with the Commission, or to omit to state in any such statement any material fact that 

is necessary to make any statement of a material fact not misleading in any material respect, if 

the person knew or reasonably should have known the statement to be false or misleading. 

92. On Thursday, October 27, 2011, MF Global filed its segregation report with the 

CFTC for close ofbusiness Wednesday, October 26, 2011 (the "Wednesday segregation 

report"). The Wednesday segregation report claimed that MF Global had approximately $116 

million in excess segregated funds as of the close of business on Wednesday, October 26, 2011. 

In fact, MF Global had a deficit in its customer segregated accounts of approximately $298 

million as of the close of business on Wednesday, October 26, 2011. 

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93. The Wednesday segregation report was a false or misleading statement of 

material fact to the Commission. 

94. MF Global knew or reasonably should have known that the Wednesday 

segregation repmi was false or misleading. 

95. On Friday, October 28, 2011, MF Global filed a segregation repmi with the CFTC 

that falsely stated the amount of excess segregated funds (the "Thursday segregation repmt"). 

The Thursday segregation repmi claimed that MF Global had approximately $200 million in 

excess segregated funds as of the close of business on Thursday, October 27, 2011. In fact, MF 

Global had a deficit in its FCM customer segregated accounts ofapproximately $413 million as 

ofthe close ofbusiness on Thursday, October 27, 2011. 

96. The Thursday segregation report was a false or misleading statement of material 

fact to the Commission. 

97. MF Global knew or reasonably should have known that the Thursday segregation 

repmi was false or misleading. 

98. During the last week of October 2011, MF Global violated Section 6(c)(2) ofthe 

Act, 7 U.S. C. § 9(2), by making these false or misleading statements of material fact to the 

Commission, when MF Global knew or reasonably should have known that the statements were 

false or misleading. 

99. At all times relevant to this Complaint, Holdings was the parent company of MF 

Global and controlled the operations ofMF Global, including the acts constituting the violations 

described in this Count Three. Pursuant to Section 2(a)(1)(B) of the Act, 7 U.S.C. § 2(a)(1)(B), 

and CFTC Regulation 1.2, 17 C.P.R. § 1.2, Holdings is liable for the violations described in this 

Count Three as a principal ofMF Global. 

42 
COUNTJFOUR 

VIOLATIONS OJF CJFTC REGULATION 166.3 

JFAILURE TO SUPERVISE DILIGENTLY 

BY DEFENDANTS MJF GLOBAL AND CORZINE 

100. Paragraphs 1 through 99 are re-alleged and incorporated herein by reference. 

101. CFTC Regulation 166.3, 17 C.F.R. § 166.3, requires each CFTC registrant, except 

an associated person who has no supervisory duties, to supervise diligently the handling of all 

commodity interest accounts carried, operated, advised, or introduced by the registrant and all 

other activities of its partners, officers, employees, and agents relating to its business as a 

Commission registrant. 

102. From at least August 2011 through October 31, 2011, MF Global and Corzine 

failed to supervise diligently the activities of their officers, employees, and agents. By this 

conduct, MF Global and Corzine violated CFTC Regulation 166.3, 17 C.F.R. § 166.3. 

VI. RELIEJF REQUESTED 

WHEREFORE, Plaintiff respectfully requests that this Comi, as authorized by Section 6c 

of the Act, 7 U.S. C.§ 13a-1, and pursuant to its own equitable powers: 

(1) FindMF Global liable for violating Sections 4d(a)(2) and 6(c)(2) ofthe Act, 7 

U.S.C. §§ 6d(a)(2) and 9(2), and CFTC Regulations 1.12(h), 1.20, 1.22, 1.23, 1.25, and 166.3, 17 

C.F.R. §§ 1.12(h), 1.20, 1.22; 1.23, 1.25, and 166.3. 

(2) Find Holdings liable as a principal for MF Global's violations of Section4d(a)(2) 

and 6(c)(2) ofthe Act, 7 U.S.C. § 6d(a)(2) and 9(2), and CFTC Regulations 1.12(h), 1.20, 1.22, 

1.23, and 1.25, 17 C.F.R. §§ 1.12(h), 1.20, 1.22, 1.23, and 1.25. 

43 
(3) Find Corzine liable as a controlling person for MF Global's violations of Section 

4d(a)(2) of the Act, 7 U.S. C. § 6d(a)(2), and CFTC Regulations 1.20, 1.22, and 1.23, 17 C.F.R. 

§§ 1.20, 1.22, and 1.23. 

(4) FindCorzineliableforviolatingCFTCRegulation 166.3, 17C.F.R. § 166.3. 

(5) Find O'Brien liable for aiding and abetting MF Global's violations of Section 

4d(a)(2) of the Act, 7 U.S.C. § 6d(a)(2), and CFTC Regulations 1.20, 1.22, and 1.23, 17 C.F.R. 

§§ 1.20, 1.22, and 1.23. 

(6) Enter an order ofpe1manent injunction enjoining Corzine and O'Brien and all 

persons insofar as they are acting in the capacity of Defendants' agents, servants, employees, 

successors, assigns, and attorneys, and all persons insofar as they are acting in active conce1i or 

pmiicipation with Defendants, who receive actual notice of such order by personal service or 

otherwise, from directly or indirectly: 

(a) engaging in conduct in violation of Sections 4d(a)(2) and 6(c)(2) of the 

Act, 7 U.S.C. §§ 6d(a)(2) and 9(2), and CFTC Regulations 1.12(h), 1.20, 1.22, 1.23, 1.25, 

and 166.3, 17 C.F.R. §§ 1.12(h), 1.20, 1.22, 1.23, 1.25, and 166.3; 

(b) applying for registration or claiming exemption from registration with the 

Commission in any capacity, and engaging in any activity requiring such registration or 

exemption from registration with the Commission, except as provided for in Regulation 

4.14(a)(9), 17 C.F.R. § 4.14(a)(9); 

(c) acting as a principal (as that te1m is defined in CFTC Regulation 3.1 (a), 17 

C.F.R. § 3.1(a)), agent, officer, or employee of any person (as that term is defined in 

Section 1a(38) ofthe Act, 7 U.S.C. § 1a(38)) registered, required to be registered, or 

44 
exempted from registration with the Commission, except as provided for in CFTC 

Regulation 4.14(a)(9), 17 C.F.R. § 4.14(a)(9); 

(d) trading on or subject to the rules of any registered entity, as that term is 

defined in Section 1a(40) ofthe Act, 7 U.S.C § 1a(40); 

(e) entering into any transactions involving commodity futures, options on 

commodity futures, commodity options (as that term is defined in CFTC Regulation 

1.3(hh), 17 C.F.R. § 1.3(hh)) ("commodity options"), security futures products, swaps [as 

that term is defined in § 1 a( 4 7) of the Act, as amended, and as further defined by 

Commission Regulation 1.3(xxx), 17 CFR 1.3(xxx)], and/or foreign cunency (as 

described in Sections 2(c)(2)(B) and 2(c)(2)(C)(i) of the Act, 7 U.S.C. §§ 2(c)(2)(B) and 

2(c)(2)(C)(i)) ("forex contracts"), for their own personal accounts or for any account in 

which they have a direct or indirect interest; 

(f) having any commodity futures, options on commodity futures, commodity 

options, security futures products, swaps, and/or forex contracts traded on their behalves; 

(g) controlling or directing the trading for or on behalf of any other person or 

entity, whether by power of attorney or otherwise, in any account involving commodity 

futures, options on commodity futures, commodity options, security futures products, 

swaps, and/or forex contracts; and 

(h) soliciting, receiving, or accepting any funds from any person for the 

purpose of purchasing or selling any commodity futures, options on commodity futures, 

commodity options, security futures products, swaps, and/or forex contracts. 

(7) · Enter an order requiring Defendants, as well as any of their successors, to 

disgorge, pursuant to such procedure as the Comi may order, all benefits received, including, but 

45 
not limited to, salaries, bonuses, commissions, loans, fees, revenues, and trading profits derived, 

directly or indirectly, from acts or practices that constitute violations of the Act as described 

herein, including pre- and post-judgment interest thereon from the date of such violations. 

(8) Enter an order directing Defendants and any of their successors to rescind, 

pursuant to such procedures as the Court may order, all contracts and agreements, whether 

implied or express, entered into between them and any of the customers whose funds were 

received by them as a result ofthe acts and practices that constituted violations of the Act, as 

described herein. 

(9) Enter an order directing Defendants to make full restitution to every customer 

whose funds were not returned as a result of the acts and practices that constituted violations of 

the Act and CFTC Regulations, as described herein, including pre- and post-judgment interest. 

(1 0) Enter an order directing Defendants each to pay a civil monetary penalty in the 

amount of the higher of (i) triple the monetary gain to that Defendant plus post-judgment interest 

or (ii) $140,000 for each violation of the Act and CFTC Regulations by that Defendant. 

(11) Enter an order requiring Defendants to pay costs and fees as permitted by 28 

U.S.C. §§ 1920 and 2412(a)(2). 

(12) Enter an Order providing such other and futiher ancillary relief as the Court may 

deem appropriate. 

46 
VH. DEMAND FOR JURY TRIAL 

Plaintiff hereby demands a trial by jury. 

Respectfully submitted, 

/~·. 0~ steVel1RitlieY9') 

Chief Trial Attorney 

sringer@cftc.gov 

Attorney for Plaintiff 

U.S. Commodity Futures Trading Commission 

Division of Enforcement 

140 Broadway, 191

h Floor 

New York, NY 10005 

646-746-9700 (office number) 

646-746-9898 (facsimile) 

47