(Bloomberg News) Jon Corzine, who joined MF Global Holdings Ltd. 20 months ago to transform the futures broker into an investment bank, quit today amid regulatory probes and after the firm filed the eighth-largest bankruptcy in U.S. history.

Corzine, the former co-chief executive officer of Goldman Sachs Group Inc., quit as chairman and CEO, New York-based MF Global said today in an e-mailed statement. Corzine, 64, who was paid more than $4 million since joining the firm, won't seek severance pay, the company said.

"I have voluntarily offered my resignation to the Board of Directors of MF Global," Corzine said in a separate statement. "This was a difficult decision, but one that I believe is best for the firm and its stakeholders."

His resignation came four days after the bankruptcy filing as the company's bets on European sovereign debt rattled investors. The Commodity Futures Trading Commission is investigating $633 million in missing customer accounts. The regulator sent a subpoena seeking information about the money to MF Global's auditor, PricewaterhouseCoopers LLP, a person briefed on the matter said yesterday, asking not to be named because the matter isn't public.

"The board of directors at MF Global is going to be getting some very serious questions in the next few weeks," said Bruce Weber, dean of the Lerner College of Business & Economics at the University of Delaware. Weber cited lack of segregation of customer money from the firm's funds among the concerns.

The trustee liquidating MF Global Inc. was given authority to investigate the firm's officers, directors, affiliates, lenders and investors, U.S. Bankruptcy court judge Martin Glenn ruled today.

Board Support Eroded

While Corzine ultimately made the decision to resign, board members had indicated to him in discussions during the past two days that he should consider stepping down, according to a person with direct knowledge of the talks who declined to be identified, citing lack of authorization to speak publicly. The board's support for Corzine eroded once talks to sell the company collapsed, the person said.

"I feel great sadness for what has transpired at MF Global and the impact it has had on the firm's clients, employees and many others," Corzine said in his statement. He said he would continue to assist the company in responding to regulatory inquiries and in the "disposition of the firm's assets."

Corzine, a former governor of New Jersey who helped run Goldman Sachs from 1994 to 1999, sought to transform MF Global into a mid-size investment bank after arriving there in March 2010. He increased the firm's risk and used its own money to trade, including investments in European sovereign debt.

European Bond Bets

As of Oct. 25, MF Global owned $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt, the company said at the time in a presentation. Concerns that it might lose money on the holdings amid Europe's debt crisis led to credit downgrades, margin calls and demands from regulators to boost capital before the bankruptcy filing.

U.S. regulators questioned MF Global's use of so-called repo-to-maturity transactions as early as March, concerns that eventually led them to demand the brokerage come up with more capital. Repurchase trades are a form of collateralized lending.

The Securities and Exchange Commission sent a letter to MF Global on March 16 asking the firm to justify how it accounted for the repo-to-maturity transactions in the year ending March 31, 2010, according to the letter signed by Jennifer Monick, an SEC senior staff accountant. Monick also asked the firm to disclose how the accounting treatment affected its financial metrics and ratios, according to the letter, which was included in MF Global's public filings with the agency.

Repo Transactions

In a March 30 response, MF Global said its repo-to-maturity transactions for that year increased net revenue by $2 million and the underlying collateral for such trades were U.S. Treasury securities, according to the letter, also filed with the SEC.

In June, the Financial Industry Regulatory Authority, the brokerage industry's self-funded regulator, noticed the company's use of European sovereign debt as collateral in similar repo-to-maturity transactions, according to a person with direct knowledge of the situation. Finra objected and told the firm to build up its capital, the person said.

Instead of lessening risk as regulators probed the investments, the firm added to the positions, Weber said.

As of March 31, MF Global had $7.6 billion repo-to-maturity transactions related to European sovereign debt, which climbed to $11.5 billion by June 30, according to a quarterly filing.

"They had their foot on the pedal," Weber said. "They weren't backing out of risky positions, they were increasing them."

Severance Conditions

Corzine was in line for $12.1 million in severance and pro- rated bonus and benefits payments if he left for "good reason" or was fired "without cause," according to an MF Global proxy statement filed in July. Of that, $9 million was to have been severance payments, according to the filing, which said the company's compensation committee found Corzine's performance had been "exemplary" since joining the firm.

Corzine took home $4.28 million in salary and cash bonuses for the two fiscal years that ended March 2011, according to the firm's proxy statement. During fiscal 2011, Corzine agreed to lower his guaranteed annual cash pay to $750,000 a year from $2 million. He received 2.5 million options to buy MF Global stock when he joined the firm, according to the proxy.

MF Global's customer funds have a shortfall of $633 million, or about 11.6 percent, out of a segregated fund requirement of about $5.4 billion, the Commodity Futures Trading Commission said yesterday. MF Global's trustee won permission to transfer 50,000 accounts in which customers of the failed brokerage have 3 million positions and a notional value of more than $100 billion at stake, saying the move will help avoid liquidations.

'Apparent Shortfall'

CME Group Inc., the world's largest futures exchange that has regulatory authority to audit MF Global's customer positions, said it had more than enough collateral to cover the firm's positions at the exchange. The funds in question are those held by MF Global, CME Group said earlier this week.

Referring to an "apparent shortfall" in segregated customer funds at MF Global, CME said the funds may have been transferred after a CME audit of the funds, in violation of regulatory rules.

"It now appears that the firm made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection," as the transactions weren't reported to regulators until Oct. 31, it said.

Under U.S. law, customer money may not be mixed with the funds of a futures broker such as MF Global.

In his 24-year career at Goldman Sachs, Corzine made a name for himself as an intrepid trader who pushed the limits of risk.

When Corzine, after almost a decade as a U.S. senator and governor, was named chairman and CEO of MF Global, his plan for expanding the futures and commodities trader involved taking more risk. Less than 20 months later, the company is bankrupt, days after posting a $192 million quarterly loss.

With Corzine unable to find a buyer, MF Global filed for protection from creditors on Oct. 31, saying it had $41 billion in assets.