One Guy Stood Up
In honor of the 10th anniversary, I thought I’d remind people what happened. We shouldn’t let things like this sit in the dustbin of human history. There is a surprise reward for you at the end too.
Capital Thinking · Issue #965 · View online
It’s been a long ten years since former Senator, former Governor, former CEO of Goldman Sachs Jon Corzine ripped off his customers to the tune of $1.6 billion dollars.
Congratulations to An Unsung American Hero
It was the 8th largest bankruptcy in US history. It should never have happened.
The people he stole money from never got the satisfaction of seeing him do the perp walk or wear the orange jumpsuit. Corzine was in the right political party with the right people in charge.
It was a clear violation of the Commodity Exchange Act. He should have been charged with a felony and received up to 10 years in prison. Attorney General Eric Holder protected Corzine because he was one of the largest bundlers for his boss.
My friend James Koutoulas took Corzine on. Head on.
We were not acquainted before the Corzine saga but we were after and we have been pals since. I happen to be on the board of advisors for his hedge fund, Typhon. I am also invested in the fund.
I also want to add, James did the whole thing pro-bono using the Commodity Customer Coalition. He’d never done a bankruptcy case before this one.
In honor of the 10th anniversary, I thought I’d remind people what happened. We shouldn’t let things like this sit in the dustbin of human history. There is a surprise reward for you at the end too.
James spent hours, literally hours and hours, on the phone with thousands of customers who were in tears. Corzine had taken their money.
Farmers couldn’t plant seeds in their fields. Livestock farmers couldn’t afford to buy grain for their animals. Traders were locked out of accounts and for many people, their life savings were lost.
James tirelessly advocated for them when regulators and exchange executives and officials abandoned them.
Not only that but there was a crisis of confidence that spilled over to all markets because of Corzine. The Dow lost 276 points in one day. CME stock tanked. The spillover effect cost innocent people millions of dollars in their portfolios.
Here is some background to help you understand the magnitude of this whole scandal.
Corzine was trading his own proprietary account at a firm called MF Global. Some local knowledge on that firm. MF Global was a roll-up of several old-line clearing firms in commodities. Among them are firms like EDF&Man, and Refco.
Those of us that were locals on the floor never had a good view of the top brass at Refco. The executives were always shysters and playing on the edge of ethical conduct. As a matter of fact, Hillary Clinton’s cattle broker Red Bone was a Refco broker.
So, Corzine fit in well with the culture that was already established there. He took the CEO job to reburnish his tarnished reputation from the Goldman days.
You might remember that Corzine was gently pushed out as CEO at Goldman Sachs. If you talk to any of the Long Term Capital Management partners, they don’t have kind words for the ethics exhibited by Corzine in their debacle.
I remember that 1998 crisis vividly. When I was on the CME Board, former NY Fed President Gerry Corrigan talked at length about the investigation he ran into the crisis. At the end of his soliloquy, he summed up that he never wanted to be that close to the brink ever again.
The rumor on the street is Goldman Sachs downloaded all the LCTM positions, lent them the money, pushed them to the limit, and then took the other side when it all collapsed.
During LCTM, Corzine was its leader.
Jeffrey Carter