MF Global sold assets to Goldman before collapse-sources

(Jan 4) - MF Global unloaded hundreds of millions of dollars' worth of
securities to Goldman Sachs in the days leading up to its collapse,
according to two former MF Global employees with direct knowledge of the
transactions. But it did not immediately receive payment from its
clearing firm and lender, JPMorgan Chase & Co, one of the sources
said.

The sale of securities to Goldman occurred on Oct. 27,
just days before MF Global Holdings Ltd filed for bankruptcy on Oct. 31,
the ex-employees said. One of the employees said the transaction was
cleared with JPMorgan Chase.

At the same time MF Global, which
was run by former Goldman Sachs head Jon Corzine, was selling securities
to Goldman to raise badly needed cash, the futures firm was also
drawing down a $1.2 billion revolving line of credit it had with
JPMorgan, according to one of the former MF Global employees.


JPMorgan spokeswoman Mary Sedarat said the bank did not withold money
because of the line of credit. She declined further comment on details
of the transactions.

JPMorgan has fought aggressively in
bankruptcy court to protect its interests, and received a lien on some
of MF Global's assets in exchange for granting the firm $8 million to
fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of
MF Global customers who have not yet received an estimated $900 million
worth of money from their accounts, which remain frozen as regulators
search for missing funds.

The hastily crafted transactions and
the seeming inability of MF Global to recoup some of the money in the
sale to Goldman may start to explain why so much money remains
unaccounted for at the futures firm.

It is unclear what type of
assets Goldman bought from MF Global, but the securities were worth
hundreds of millions of dollars, the former employees said. The sources
spoke on the condition of anonymity.

The Wall Street Journal
previously reported that George Soros' fund was a buyer of securities
sold by MF Global, scooping-up some of its European sovereign debt at a
deep discount. Panic among investors and clients about MF Global's $6.3
billion bet on European sovereign bonds led to its demise.


Corzine, who was CEO of MF Global at the time of the collapse, headed
Goldman Sachs from 1994 to 1999 before being ousted after a power
struggle with co-CEO Henry Paulson.

Corzine and other top MF
Global executives reached out in desperation to Goldman Sachs Group Inc
and JPMorgan, as well as Jefferies Group Inc Barclays Plc, Citigroup
Inc, Deutsche Bank AG, Macquarie Group Ltd, State Street Corp and Wells
Fargo & Co, as potential buyers in its final days as the firm
teetered toward collapse, Reuters earlier reported. - Reuters

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