By Hilary Till, Solich Scholar, J.P. Morgan Center for Commodities, University of Colorado Denver Business School
In the fall of 2011, futures market participants were caught off-guard when MF Global filed for bankruptcy. This article takes the position that a number of red flags existed as far back as 2007, regarding the firm’s financial weakness, which could have served as a warning to those investors relying on MF Global as a fiduciary. The article concludes that while MF Global’s business model appears not to have been viable after 2007, this observation does not excuse unlawful practices. In particular, the firm effectively (and arguably unlawfully) used customer funds in large-scale proprietary trades that the firm ultimately could not fund, leading to its chaotic bankruptcy.