The voluntary return of $546 million in MF Global customer assets, the subject of hard fought 2 Â˝ year battle, was not motivated solely by the kindness of JP Morgan.Â Rather, it could be considered fruit from a likely hard investigation now gearing up if not already under way.Â This investigation, declared “dead” many times over in leaks to the press from official sources, has heated up, asÂ first discussed here.
The return of illegally transferred MF Global customerÂ assetsÂ was always a key bone of contention.Â JP Morgan had summarily dismissed regulatory and public pressure to return customer assets, so the question is: why submit to authority now?
In 2012 the National Futures Association (NFA) went so far as to send the bank a public letter, which was generally brushed aside as were numerous verbal requests and mounting public pressure from groups such as the Commodity Customer Collation and its leaders James Koutoulas and John Roe.Â This significant pressure was dismissed, yet an attempt by bankruptcy trustee James Giddens was successful. Â The fact this occurred at this moment in time is not aÂ coincidence.
Speculation is JP Morganâ€™s normally dismissive attitude towards government regulators might have changed in the face of what is expected to be a no holds bar CFTC / DoJ criminal investigation.Â In other words, the specter of government actually asserting itself and allowing career investigators to do their jobs unimpeded is enough motivation for JP Morgan to return what are documented to be illegally transferred customer assets.
But perhaps more important to the future, a real investigation could also be motivation for JP Morgan to provide critical testimony regarding the criminal activity of MF Global executives, including that of Jon Corzine.
The need for deterrence that derives from a Jon Corzine conviction is more important because the future that matters most.Â Since 2008, when financial crimes that damaged the US financial system were was documented not to be investigated by DoJâ€™s former assistant attorney general in charge of criminal investigations Lanny Breuer, Wall Street crime has imploded in its brazen disregard.Â MF Global is one example, but the case of HSBC laundering money for terrorist organizations and drug cartels â€“ after being warned on several occasions not to do so â€“ is a sign of complete disrespect and a breakdown of law and order on Wall Street. Â Â When the full story is known, Mr. Corzineâ€™s disrespect for the US financial system and its cogs of justice will likely stand as the turning point in a long battle.
Is this real?Â Is the investigation a serious point where the rule of law might actually apply to once exempt Wall Street players?Â We donâ€™t know for certain at this point, but one key tell is going to be the type of charges filed against MF Global executives.Â If RICO charges are used, this will send the powerful message that a cop is in fact back on the beat.
Mark Melin is author of three books and taught a course on managed futures for Northwestern University’s Executive Education program. Â To read more of his blog posts, click here (requires free registration). Â Contents Copyright (C) 2013 Mark Melin.