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How to Loose $1.2 Billion – Without Excuses

I was today reading a Financial Times article about the collapse of MF Global, a global broker dealer. If you did not know the story, here’s a short history:
On October 31st MF Global reviewed that the company lost $1.2 billion from various trades going the wrong direction. The problem was that no warning was issued in advance, making the sudden collapse a shock.
What is interesting is that Mr. Corzine, MF’s previous chief executive, maintains that “I simply do not know where the money is”. Apparently, multiple separation of trading rules were breached and the money in these trades disappeared…
Mr. Corzine’s testimony of today in front House Committee on Agriculture will be enlightning (if he decides to say anything, given his wish to prevail on the 5th amendment). However, it also highlights some equally unbelievable possibilities:
– either the trades (especially the millisecond electronic trades that now most of the brokers undertake) are uncontrollable sometimes (which we testified twice this year with the flash crashes)
– either the money were hidden by the company and the personnel is not willing to disclose,
– either some other (equally unbelievable) possibility.
I am very curious to hear what the characters involved have to say about this and how the story will unfold. Until then, I still hold my belief that at such scale it is possible that something went terribly wrong… or terribly well for somebody else.

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