The big question at MF Global is obvious: What happened to the missing $1 to $1.2 billion in customer accounts?

Most think it is somehow tucked away in overseas accounts, perhaps under the control of foreign trustees. Others think it might have been used to back trades gone awry and is now lost forever. Others have no idea, and this group scandalously includes a lot of the top executives. But CNBC reports another theory is making the rounds.

"It was Madoff-ed. According to a top executive at a larger Wall Street firm, his top guys believe that the money didn't go anywhere. It just never existed. The idea is that the ‘missing' funds were phony trading profits that were booked in client accounts even though the underlying trades never really occurred. MF Global may have reported to clients that they had made profits for trades that never actually occurred."

This is interesting. Is it really possible that a rogue trader--someone under intense pressure to keep clients whole on paper--concocted the trades and watched in dismay as the entire company blew up.

"A scheme like this need not involve the entire firm-or even the senior management. If this is indeed what happened, a small group of rogue traders at MF Global may have been able to carry off the rouse for quite some time. Perhaps perpetually--if not for the bankruptcy at MF Global."

In the aftermath of the Kweku Adoboli scandal, it might strike some as plausible. But we tend to doubt it. In fact, the more interesting question is who is floating the idea. It may well be MF Global executives looking for some covering fire.

For more:
- here's the article

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