Victims of 2 Ponzi schemes suing MF Global for lost money
— -- The now-bankrupt brokerage headed by former U.S. senator Jon Corzine has been targeted by lawsuits trying to recover millions of dollars stolen by two Ponzi scheme architects.
Federal court records show MF Global, which filed for bankruptcy-court protection on Monday, was sued in January by the trustee seeking assets for victims of Long Island ex-con scammer Nicholas Cosmo.
Cosmo was sentenced last month to 25 years in prison for stealing more than $195 million from investors told they were investing in commercial bridge loans through Cosmo's Agape World and Agape Merchant Advance. He instead diverted the money to pay for personal luxuries and risky bets on foreign currency and other futures trades through MF Global.
The New York-based brokerage was also sued last year by another trustee seeking more than $37 million stolen from investors by Michael Meisner, who ran a Ponzi scheme through Phoenix Diversified Investment in Palm Beach, Fla.
Meisner pleaded guilty in 2009 to diverting the money to at least 15 luxury cars, eight Florida homes and losing futures trading bets. He was sentenced last year to a 188-month prison term.
The cases are among several legal and regulatory actions that have focused on MF Global, whose collapse is Wall Street's largest since the 2008 Lehman Bros. bankruptcy. Regulators are now checking whether the brokerage moved millions of dollars out of customer accounts as MF Global teetered over a losing bet on European sovereign debt.
Trustee Kenneth Silverman alleged in a court complaint that MF Global let Cosmo open trading accounts even though he submitted conflicting information and documents. After the brokerage allowed Cosmo to make transactions above $100,000, he "began trading and taking positions that no reasonable (Futures Commission Merchant) would have allowed an account holder to take without strict oversight and monitoring of the trades and the source of the funds," the complaint charged.
"Even a minimal inquiry into Agape's business would have revealed that Cosmo was looting Agape," said the complaint, which alleged Cosmo's MF Global losses totaled $19 million.
Court records show the brokerage agreed to give the trustee financial data and e-mails related to Agape. A pre-trial hearing in the case is set for Nov. 14.
In the Phoenix Diversified case, MF Global initially denied trustee Kenneth Welt's charge that Meisner transferred $2.9 million through the brokerage in transactions with "intent to hinder, delay or defraud" victims of the Ponzi scheme.
But the brokerage settled in March, agreeing to pay $300,000. While that's a fraction of the total alleged transfers, Welt called the outcome fair because it avoids long and costly litigation.
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