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MF Global’s Precedent: Co-Mingled Funds Are Gone Forever

Written by Gary North on December 8, 2011

MF Global mingled customers’ funds with its speculative accounts. Then the money disappeared: $1.2 billion. It cannot be accounted for.

It doesn’t matter. The funds will be used to pay off MF Global’s creditors.

One thing seems to be certain: Investigators and banks that have had extensive dealings with MF Global believe whatever money is missing is probably gone forever and won’t be able to be returned to investors when the investigation is complete, according to people with direct knowledge of the matter. That’s because even if customer funds are located, if they were used  to pay off legitimate claims of creditors those creditors are legally entitled to the money. (An MF Global spokesperson had no immediate comment.)

That’s the law. Tough bananas if you trusted MF Global.

This is what farmers have faced for a century. Say that a farmer stores his grain in a commercial silo. The silo company declares bankruptcy. The farmer’s grain is sold to pay the creditors.

Unfair, you say? No, it isn’t. Farmers know this in advance. They voluntarily accept risk in paying for storage.

What’s unfair about the MF Global deal is that investors who used the firm as a way to “store funds” were not told that their funds were at risk. The law prohibits co-mingling of funds on deposit and the risk-side of the operation. Anyway, that’s what investors thought. They were wrong.

Gerald Celente, who has warned against total chaos and economic collapse, had $100,00 in gold — meaning IOUs for gold — at MF Global. He thought he could trust Corzine. He did not buy American eagle gold coins and take delivery. He did not use GoldMoney or Bullion Vault to store bullion outside the USA. No, he trusted the legal system. He was betrayed. He was not alone.

How much do you trust the legal system? Have you read the fine print of the fund that serves as the caretaker of your funds?

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One thought on “MF Global’s Precedent: Co-Mingled Funds Are Gone Forever

  1. I must say, I am surprised that the very savvy Gerald Celente would fall for this most transparent scam. I am no big investor, but I am smart enough to know that, in these times, you can safely trust NO ONE with your money.