Former MF Global CEO Corzine sued by trustee

Jon Corzine was sued by the bankruptcy trustee liquidating MF Global Holdings Ltd , who accused the former chief executive of engineering a high-risk business strategy that culminated in the commodities brokerage's destruction.

Louis Freeh, the trustee, accused Corzine of breaching his duties to shareholders and failing to act in good faith, causing MF Global under his stewardship to lose well over $1 billion in value prior to its October 2011 bankruptcy.

"The company's procedures and controls for monitoring risk were lacking and in disrepair," Freeh said in a lawsuit filed Monday night in U.S. bankruptcy court in Manhattan. "Corzine engaged in risky trading strategies that strained the company's liquidity and could not be properly monitored."

Also named as defendants were former MF Global President and Chief Operating Officer Bradley Abelow and former Chief Financial Officer Henri Steenkamp.

A spokesman for Corzine had no immediate comment. Lawyers for the defendants did not immediately respond to requests for comment.

The lawsuit seeks damages from the defendants. It was not immediately clear whether insurance covered potential payouts.

MF Global filed for Chapter 11 protection less than two years after Corzine, a former Goldman Sachs chief and former New Jersey governor and senator, became chief executive.

The collapse came after markets were spooked by the company's $6.3 billion bet on European sovereign debt.

Corzine sought to transform MF Global into a global investment bank, with a strategy that included bets on sovereign debt of Belgium, Ireland, Italy, Portugal and Spain.

But as Europe's economy weakened in 2011, MF Global was required to meet margin calls on its trades, and regulators found that money in customer trading accounts was used to cover liquidity shortfalls.

MF Global became a cause celebre in Washington after it was discovered that about $1.6 billion was missing from accounts of its commodities customers. Much of the money has been recovered.

On April 5, MF Global won court approval of its liquidation plan, with unsecured creditors recovering as much as 34 cents on the dollar.

In an April 4 report, Freeh found that reporting systems were lacking, and failed to alert MF Global officials that customer money was being misused.

Freeh indicated that he had been preparing to sue Corzine and others, but chose at the time to wait pending the outcome of mediation in separate securities class-action litigation.

The case is Freeh et al v. Corzine et al, U.S. Bankruptcy Court, Southern District of New York, No. 13-ap-01333. The main bankruptcy case is In re: MF Global Holdings Ltd in the same court, No. 11-15059.

(Reporting by Jonathan Stempel in New York; Editing by Gerald E. McCormick, Sofina Mirza-Reid and John Wallace)