MF Global's October 2011 bankruptcy was the eighth largest bankruptcy by assets in the United States. James Giddens, the bankruptcy trustee, issued a press release on February 6 stating that his investigation found that money from customer accounts that was supposed to be segregated was improperly used to fund MF Global's daily activities. Improper transfers of customer money occurred regularly in amounts under $50 million before MF Global's bankruptcy. MF Global wasn't caught, because it put the money back before customers knew it was missing.

Note added April 23, 2012: This is from the Trustee's preliminary status report of February 6, 2012: "The investigation to date has found that transactions regularly moved between accounts and that funds believed to be in excess of segregation requirements in the commodities segregated accounts were used to fund other daily activities of MF Global. In the past, such transfers were in amounts of less than $50 million, but as liquidity demands increased and could not be me from internal sources, much larger amounts were used, apparently with the assumption that funds would be restored by the end of the day. By Wednesday, October 26th, as the result of increasing demands for funds or collateral throughout MF Global, funds did not return as anticipated. As these withdrawals occurred, a lack of intraday accounting visibility existed, caused in part by the volume of transactions being executed, and the 4(d) U.S. segregated commodity customer account appears to have reached a deficit condition on Wednesday, October 26th that continued through to MF Global's bankruptcy."

Note added March 1, 2012: In an earlier commentary, "MF Global Revelations Keep Getting Worse," November 22, 2011, I noted that the price volatility of MF Global's total return swap to maturity that it called a repo-to-maturity transaction on sovereign debt would have produced probable shortfalls on several days during 2011. The price volatility of these transactions was a red flag that indicated firm controls needed to be in place to monitor MF Global's ability to meet its margin requirements. MF Global's issues were apparent long before its bankruptcy.

On January 30, 2012 the Wall Street Journal did a hilariously bad job of reporting when its front page article stated that a "person close to the investigation" said that as a result of chaotic trading in the week before MF Global's October 31 bankruptcy, customers' money "vaporized." Money doesn't vaporize. It's true that tracing money transfers can be tedious, but that's why we call it work.

As for the Wall Street Journal's article, the editor should have made it vaporize. I was having breakfast with several traders at Chicago's East Bank Club. One trader read the passage aloud. The entire table burst out laughing. Then he got up and ceremoniously threw the paper in the trash. The entire table applauded.

Fox Business News had people in stitches when it reported that federal investigators are saying that this wasn't criminal, it's just a matter of sloppy bookkeeping.

The habitual filching of customers' funds -- even if the funds are later replaced -- goes way beyond sloppy bookkeeping. It goes way beyond bad judgment. Just because MF Global got away with it for a long time before it blew up in its face doesn't mean one can call it sloppy bookkeeping and have any reasonable person believe it. If federal investigators and law enforcement people want to make public statements like this, one should investigate corruption in their ranks. They seem to be providing undeserved excuses as a trial balloon to see if it will fly. Nice try, but it's not working.

According to the bankruptcy trustee, money was repeatedly filched from customers' accounts. That goes way beyond sloppy bookkeeping.

Senior officials of the Chicago Mercantile Exchange and of MF Global's regulator, the U.S. Commodity Futures Trading Commission (CFTC), have already testified to Congress their belief that MF Global violated regulations -- it broke the law -- because using customers funds, money that was supposed to be in segregated accounts, to pay off MF Global's creditors or to use that money to fund MF Global's day-to-day operations is not permitted.

MF Global CEO Jon Corzine, a former head of Goldman Sachs, signed off on statements that said his internal controls were adequate. After Enron, the Sarbanes Oxley Act was meant to assure Americans that officers that signed such statements would be held accountable for their accuracy.

Federal law enforcement is trying to get away with saying no crime has been committed, because there was no direct criminal intent. Proving intent is very difficult. It's hard to get into someone's head and figure out what they were thinking when they were purloining funds. I mean, what could they possibly have been thinking?

Here's something that isn't at all difficult to prove. Jon Corzine should have a big problem under Sarbanes Oxley. There's no getting around the fact that MF Global's compliance standards were unreasonably inadequate.

Jon Corzine is a campaign fundraiser, a "bundler," for campaign contributions for President Obama. Money contributed by Jon Corzine and his wife was returned by President Obama's campaign committee, but the other money raised by Jon Corzine was not returned. It seems that both sides of the aisle in Congress view huge fundraisers like Corzine as untouchable. Congress will pose for the cameras and hold hearings, but absolutely nothing of meaning has been done to clean up the mess in the financial system.

When MF Global's condition worsened, the amounts grew much larger, and MF Global couldn't replace customers' funds in time to cover-up the shortfall. Investigators believe the segregated commodity customer account reached a deficit -- meaning customer funds were obviously missing -- on Wednesday, October 26, and that condition continued through to MF Global's bankruptcy.

MF Global's officers cannot claim to have been ignorant of missing customer money when it habitually took customer money in small amounts and then took money in huge amounts, and the fact that customer money was missing showed up on an MF Global report. Investigators are now looking at multiple wire transfers including a just-made-public suspicious transfer of $325 million that was transferred on October 31. This is just one of many transactions that are under investigation.

Since the September 2008 financial crisis, we've seen a pattern of misdeeds, dodgy financial reporting, congressional "investigations" that are all for show, slow and incompetent investigations, and ultimately a slap on the wrist for wrong-doers. The MF Global "investigation" is just the last in a long list of the miscarriage of justice that has destroyed confidence in global finance.

First Business Morning News's Bill Moller interviewed me about this ongoing pattern of crime and lack-of-punishment in this brief segment: