(Reuters) - Long before the brokerage firm MF Global collapsed into bankruptcy and prompted a frantic search for missing customer money, the company had already established a checkered history.
An analysis of regulatory enforcement actions shows MF Global has drawn more sanctions from the U.S. commodity futures regulator than each of its 14 closest peers in that market over the past decade. MF Global has also drawn the second-highest amount in fines, for alleged lapses in risk supervision and recordkeeping.
MF Global and the U.S. Commodity Futures Trading Commission both declined to comment, Reuters report.
And five private lawsuits against the firm allege, among other things, that MF Global was a vehicle used by two Ponzi schemes, including one that was later dubbed "mini-Madoff."
None of the violations took place on the watch of Jon Corzine who took the helm of MF Global in 2010. A former chief of Goldman Sachs and a one-term New Jersey governor, Corzine resigned from MF Global last week, expressing "great sadness" over the firm's collapse.
The broader issue of internal control and risk-taking at MF Global before its meltdown is emerging as a central avenue of inquiry both for lawyers filing claims on behalf of investors, and for regulators seeking to find some $600 million missing from MF Global.
"The issue of internal controls will be part of our independent investigation," said Kent Jarrell, a spokesman for the trustee overseeing MF Global's bankruptcy.
While MF Global clients headed for the exits in the final weeks as fears grew about risky bets on European debt, regulators and investors had already raised concerns about how the company was run. Among them was the CFTC, which repeatedly sanctioned the company for "risk supervision failures".
Among more than a hundred brokers overseen by the CFTC, MF Global ranked eighth largest by customer money, with $7.2 billion in segregated client accounts, according to an August 2011 CFTC database. Larger brokers in the top 15 included heavyweights such as Goldman Sachs, Newedge USA and JP Morgan Securities. And smaller merchants in the top 15 included Barclays Capital Inc, Credit Suisse and Jefferies Bache.
Between 2000 and early 2011, the CFTC sanctioned MF Global for six alleged violations, involving lax supervision and recordkeeping, and levied penalties totaling more than $12 million, according to the agency's data. Only Morgan Stanley drew a higher penalty -- a $14 million fine in 2010 for an alleged attempt to hide a large oil futures trade from regulators.
In the same time period, the CFTC sanctioned Citigroup, Merrill Lynch, Newedge, JP Morgan and ADM Investor Services one time each for separate alleged violations, and imposed penalties not exceeding $500,000 in each case, according to the agency's enforcement records. UBS was reprimanded twice, and fined for a total of $250,000. And in 2011, a former Citigroup trader was ordered to pay nearly $1.5 million in civil penalties and in compensation to Citigroup, for allegedly unauthorized trading.