A federal judge on Tuesday rejected a bid by former MF Global Holdings Ltd Chief Executive Officer Jon Corzine to dismiss a U.S. regulator's lawsuit that claims he played a key role in causing one of the country's biggest bankruptcies ever.
U.S. District Judge Victor Marrero said the Commodity Futures Trading Commission's allegations "give rise to reasonable inferences" that Corzine and former Assistant Treasurer Edith O'Brien illegally transferred money out of customer accounts to stem losses from big bets on European sovereign debt. Marrero did not rule on the merits.
The decision came two months after Marrero denied Corzine's request to dismiss investor litigation seeking to hold him, other executives and many banks responsible for the futures brokerage's collapse.
Corzine's lawyer, Andrew Levander of the law firm Dechert, did not immediately respond to a request for comment.
O'Brien's lawyer, Darren Kinkead of Steptoe & Johnson, did not immediately comment.
A call to the CFTC was not immediately returned.
The CFTC previously settled with the firm's brokerage unit, MF Global Inc, which agreed to return more than $1 billion to harmed customers and pay a $100 million penalty.
MF Global's bankruptcy in October 2011, which left about $1.6 billion of customer funds missing, was one of the 10 largest bankruptcies in U.S. history.
The collapse prompted a wave of litigation, as well as a U.S. Department of Justice probe. No criminal charges have been brought.
Corzine, a former New Jersey governor and U.S. senator as well as a former co-chair of Goldman Sachs & Co, had claimed the CFTC failed to show that he did not adequately oversee the firm and asserted that he was not responsible for directly supervising employees involved in the transfers of customer funds.
In November, James Giddens, the trustee unwinding MF Global's brokerage unit, won bankruptcy court approval for a plan to close the remaining shortfalls and fully repay thousands of former customers.
Corzine and other executives have appealed that ruling, saying it is unfair for Giddens to repay customers and then pursue claims against them to recover those funds.
The case is DeAngelis et al v. Corzine et al, U.S. District Court, Southern District of New York, No. 11-07866. The bankruptcy cases are In re: MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790; and In re: MF Global Holdings Ltd in the same court, No. 11-15059.