Congratulations to An Unsung American Hero

Ten Years Ago, One Guy Stood Up (If You Want an LGB Token, Read and Share This Post)

Nov 1, 2021

It’s been a long ten years since former Senator, former Governor, former CEO of Goldman Sachs Jon Corzine ripped off his customers to the tune of $1.6 billion dollars.

It was the 8th largest bankruptcy in US history. It should never have happened. The people he stole money from never got the satisfaction of seeing him do the perp walk or wear the orange jumpsuit. Corzine was in the right political party with the right people in charge. It was a clear violation of the Commodity Exchange Act. He should have been charged with a felony and received up to 10 years in prison. Attorney General Eric Holder protected Corzine because he was one of the largest bundlers for his boss.

My friend James Koutoulas took Corzine on. Head on. We were not acquainted before the Corzine saga but we were after and we have been pals since. I happen to be on the board of advisors for his hedge fund, Typhon. I am also invested in the fund.

I also want to add, James did the whole thing pro-bono using the Commodity Customer Coalition. He’d never done a bankruptcy case before this one.

In honor of the 10th anniversary, I thought I’d remind people what happened. We shouldn’t let things like this sit in the dustbin of human history. There is a surprise reward for you at the end too.

James spent hours, literally hours and hours, on the phone with thousands of customers who were in tears. Corzine had taken their money. Farmers couldn’t plant seeds in their fields. Livestock farmers couldn’t afford to buy grain for their animals. Traders were locked out of accounts and for many people, their life savings were lost. James tirelessly advocated for them when regulators and exchange executives and officials abandoned them.

Not only that but there was a crisis of confidence that spilled over to all markets because of Corzine. The Dow lost 276 points in one day. CME stock tanked. The spillover effect cost innocent people millions of dollars in their portfolios.

Here is some background to help you understand the magnitude of this whole scandal.

Corzine was trading his own proprietary account at a firm called MF Global. Some local knowledge on that firm. MF Global was a roll-up of several old-line clearing firms in commodities. Among them are firms like EDF&Man, and Refco. Those of us that were locals on the floor never had a good view of the top brass at Refco. The executives were always shysters and playing on the edge of ethical conduct. As a matter of fact, Hillary Clinton’s cattle broker Red Bone was a Refco broker. So, Corzine fit in well with the culture that was already established there. He took the CEO job to reburnish his tarnished reputation from the Goldman days.

You might remember that Corzine was gently pushed out as CEO at Goldman Sachs. If you talk to any of the Long Term Capital Management partners, they don’t have kind words for the ethics exhibited by Corzine in their debacle.

I remember that 1998 crisis vividly. When I was on the CME Board, former NY Fed President Gerry Corrigan talked at length about the investigation he ran into the crisis. At the end of his soliloquy, he summed up that he never wanted to be that close to the brink ever again.

The rumor on the street is Goldman Sachs downloaded all the LCTM positions, lent them the money, pushed them to the limit, and then took the other side when it all collapsed. During LCTM, Corzine was its leader.

At MF Global, Corzine treated his customers as his own personal piggy bank. Speculative positions he put on went against him and he took their money to cover them, hoping the positions would come back. If you don’t understand how accounts work at clearing firms like MF they operate like this. When you are a customer your funds are segregated from the working capital of the firm. If the firm were to engage in nefarious activity or have a proprietary trade go against it, your money is safe. All you do is transfer it to another firm. That’s why they call it, “segregated funds”.

As my friend Francine McKenna outlines, Corzine flouted 163 years of the sacred trust between firm and customer. He was bigger than the law, and all protocols surrounding the way the Futures business conducted itself since the founding of the CBOT in 1848.

Koutoulas got all the money back. The story is just so much larger than “he got the money back”. It’s not like Corzine said, “My bad, you caught me with my hand in the cookie jar.” This isn’t Illinois Governor JB Pritzker paying back property taxes he tried to avoid. Although, the after-effects with no real consequences sure seem like it. No one went to jail and no one was convicted. Reputations remained intact.

Things got so bad, Jaime Dimon the CEO of JP Morgan Chase canceled Koutoulas bank accounts and credit cards he had with the firm! You might see why long-time traders chuckle when Congress deeply investigates GameStop but looks the other way when it’s former members of their deliberative body.

MF Global customers had $6.7 billion dollars of their assets frozen. I know several people who couldn’t trade out of their positions. Many people I know woke up in the morning, went to work, and were locked out of the trading floor. Customers from all fifty states were fleeced by Corzine. Customers around the world couldn’t manage their risks or do anything. It was as if they were sitting in a car, and totally out of gas and their car battery dead.

James took the unorthodox step of guaranteeing victory in an interview on CNBC with Rick Santelli. Who did he think he was? Joe Namath? Koutoulas didn’t have malpractice insurance at the time. He was physically in court in front of a judge solo every day for two years. Lawyers will know what sort of gumption this took.

Corzine had cover from Obama AG Eric Holder, but he also had cover from former Clinton-era FBI director Louis Freeh. Freeh was an MF Global trustee and filed sanctions against James, which he fought against and won.

MF Global happened after the financial crisis of 2008-09. It’s a blip in people’s memories. But, it is worth remembering because of the hubris of people like Corzine and the fact that they got away with it. We see a lot of people consistently exhibiting the same hubris today. As my friend Glenn Reynolds says, “Laws and ethics are for the little people.”

I wanted to do something to honor James and his leadership. As Otter from Animal House said, “I think that this situation absolutely requires a really futile and stupid gesture be done on Somebody’s part.” I agree, don’t you?

We have a way to honor the Big Guy and honor James at the same time.

Just like Jon Corzine, President Biden’s ethics are to be found somewhere down around twenty thousand leagues under the sea. James loves to scuba dive so maybe he can find them down there.

It’s fitting that on the day after the tenth anniversary of the Corzine fraud, James is launching a true institutional multi-strategy fund backed by a $30B ERISA fiduciary. This fund combines all of the innovative traders that Typhon has brought on during its 13-year history. Many of the fund managers have turned hundreds of dollars into millions. Turns out an old floor trader friend of mine Dave Klusendorf, who I introduced to James, is CIO and heavily involved.

I wanted to do something for James that might have relevance to crypto and the world today. Doing things around Halloween is always fun too since James gets pretty creative then.

Today, I am sending James 1 trillion LGB tokens for him to have fun with. You might ask, “What’s an LGB token?” LGB stands for “Let’s Go Brandon”, which is code for you know what. If you don’t know, click the link and get with the program.

Here is the token:

The coin is NOT thumbing its nose at you know what.

One of my friends started the LGB coin as a collectible joke coin. It is not a security. We are going to have some fun.

You can get an LGB token too! I did it by opening a crypto wallet at MetaMask. You can use any DeFi Wallet. You can do it on your phone, or put a browser extension on your browser. Go through the steps to create your wallet.

You can’t use a traditional crypto wallet like Coinbase. You have to use a DeFi wallet. Because you are reading this, you are learning about cutting-edge crypto too!

The coin is still brand new. It’s in the process of being listed on decentralized exchanges and they can follow the progress here. If you are a current crypto customer contact the exchanges you trade on and tell them to list this coin.

I will be sending tokens to a lot more friends for them to distribute. I am putting together a list now. But you need to read this companion piece before you distribute.

I will also be sending tokens to people who do things for the fiscal conservative movement and for individual freedom in the world-as long as they have a DeFi wallet. Hey legislators, want to get some tokens? Here is your chance.

Examples of people I would send tokens to are parents who speak out at school board meetings or local council meetings. You can’t just get them for a tweet. I want to reward people that take action because if you read the companion post you will see it costs money to distribute.

Anyone with tokens can give tokens to people who do things for the fiscally conservative and individual liberty movement. And then those people can donate.. and so on and so on.

I’d love to hear protestors around the world protesting the crackdowns by centralized government chanting “Let’s Go Brandon” or in languages around the world: