Mad dash for ca$h

MF Global CEO Jon Corzine let chaos reign in the run-up to the brokerage firm’s collapse as customers raced for the exits and employees frantically tried to unwind positions, according to the first official account from the firm’s court-appointed trustee.

The report released yesterday by bankruptcy trustee James Giddens said employees began dipping into client cash five days before MF filed for bankruptcy on Oct. 31. A shortfall that began on Oct. 26 ballooned to nearly $1.2 billion amid growing pressure to keep the firm afloat.

Giddens said employees struggled to keep up with the “unprecedented volume” of withdrawals, leading to a number of transactions that either were recorded “erroneously” or not at all.

AP

Ex-MF Global boss Jon Corzine

The trustee stopped short of saying whether the shortfall was intentional or the result of sloppy bookkeeping, but he left open the door to going after MF officers, directors and employees as part of his effort to claw back money for customers.

A person close to the trustee said Giddens would only file claims against officers and directors if he finds evidence of fraud or negligence.

“Our investigation is continuing, and we have not come to a conclusion on a number of issues of fault,” said Kent Jarrell, a spokesman for the trustee.

The report offers the first look at the results of a three-month probe launched after $1.2 billion was discovered missing from MF customers’ brokerage accounts in the aftermath of the bankruptcy.

It paints a picture of a “chaotic situation” as MF’s counterparties and customers started demanding money for margin calls, collateral or account liquidations amid growing concerns about MF’s cash position.

Squeezing the company’s cash coffers were $6.3 billion in bets on risky European bonds as part of Corzine’s ill-fated plan to transform MF from a sleepy brokerage into an investment banking powerhouse.

Those outsize bets — combined with disappointing quarterly earnings and a number of credit downgrades — triggered the equivalent of a run on the bank.

Giddens said his investigation found that MF regularly tapped excess customer money to fund its operations to the tune of less than $50 million a day but had always replaced it.

That amount escalated as the firm’s situation deteriorated. By Oct. 26, MF had depleted its customers’ cash cushion, which it was allowed to use for daily business needs, and had dug deeply into their segregated accounts.

In all, $105 billion in cash transactions took place in and out of the brokerage arm in the week leading up to the bankruptcy, as well as $100 billion in securities transactions.

Giddens said he has traced “most of the parties” that received transfers from MF in the final days. They include banks, exchanges, clearing houses, MF customers and counterparties.

The next step, Giddens said, will be to “correlate cash transfers to relevant movements of securities used as collateral or loaned to counterparties,” suggesting that the process for getting the money back is still in its early stages.

kwhitehouse@nypost.com