MF Global lost $140M on wheat futures — a rogue trader in a branch office

MF Global was one of the world's largest derivatives brokers, a spin-off from Man Group that handled futures and options for clients globally. In February 2008, the company announced a bad debt provision of $141.5 million related to unauthorized trading by a representative in one of its branch offices.

The representative had been trading wheat futures in his personal account and substantially exceeded his authorized trading limits. The unauthorized trades went undetected until the losses had accumulated to over $140 million. When MF Global discovered the losses, it held an emergency conference call with investors on February 28, 2008.

The incident triggered regulatory action. The US Commodity Futures Trading Commission (CFTC) fined MF Global $10 million for supervision violations, citing both this wheat incident and an unrelated natural gas incident from 2003. The CME Group also fined MF Global $495,000 specifically over the wheat trading incident.

The case was a precursor to MF Global's much larger collapse in 2011, when the firm failed after betting $6.3 billion on European sovereign debt. The 2008 wheat loss was a warning sign of the firm's weak risk controls that went unheeded.