MF Global became the largest US casualty of the eurozone crisis on Monday as it filed for bankruptcy protection after making big bets on the European sovereign debt market.
The broker-dealer, run by Jon Corzine, an ex-chief executive of Goldman Sachs and former governor of New Jersey, admitted defeat in its attempt to stay in business after an 11th-hour deal to sell itself to Interactive Brokers Group fell apart. It is the largest failure of a US financial company since the collapse of Lehman Brothers in 2008.
MF Global’s brokers were barred from trading floors across the US as market participants tried to assess whether the company’s failure would trigger the same catastrophic effects as Lehman or the more short-term and contained up-heaval caused by the 2005 bankruptcy of Refco, another futures broker. MF Global was undone by a slew of credit downgrades to “junk” after Moody’s, Standard & Poor’s and Fitch decided the company had taken on too much risk with its $6.3bn bet on European sovereign debt.