The drama over the meltdown of the brokerage firm MF Global pivots around a clash between two veteran traders who rose from relatively humble roots to the very top of the futures-trading business.
One is Jon Corzine, the firm's former CEO who just testified in Congress about the mystery surrounding some $1 billion in customer money that vanished from MF Global before it failed. The other is Terrence Duffy, the chairman of CME Group Inc, the huge Chicago exchange where MF Global did most of its trading.
At stake is not only Corzine's reputation - and whether his career on Wall Street and in politics comes to an ignominious ending - but investors' trust in Duffy, the CME and the U.S. futures industry, which is largely self-regulated.
Corzine and Duffy barely know each other, but their businesses were enmeshed in the clubby futures trading world. The CME made money from MF Global's trading, and was supposed to watch for violations of rules designed to protect investors.
The plain-spoken CME boss alleged that Corzine may have known of improper use of client money.
"In our opinion, someone has violated the law," Duffy told Congress last week, without specifying who that someone might be. He added that MF Global "falsified" its balance sheets to mislead CME auditors.
Duffy's statements, backed up by a 10-page, hour-by-hour chronology of MF Global's final days, provide the most detailed public accounting of the frantic dissolution of one of the country's largest futures brokerages.
The closest thing to a smoking gun presented by Duffy was his disclosure of a conference call in the wee hours of Oct. 31, when MF Global was desperately trying to find a buyer to stave off bankruptcy. In those chaotic hours, the brokerage firm appears to have secretly dipped into customer accounts that were supposed to be kept safe by the brokerage, Duffy said.
In that call, a senior MF Global employee told CME auditor Mike Procajlo that "Corzine knew about loans that had been made from the segregated customer accounts," according to the exchange's chronology. Procajlo has declined to comment.
Corzine has repeatedly denied any knowledge of the alleged misappropriation of customer funds, which, if true, could constitute a breach of federal law. He told Congress he had no idea what Duffy was talking about. "I did not instruct anyone to lend customer funds."