Updated from 2:11 p.m. EDT
There are a hundred story lines to be written about the fall of MF Global, the latest victim of Europe's sovereign debt crisis.
MF Global collapsed after a regulatory filing last month revealed its heavy bets on European sovereign debt, prompting credit rating downgrades and investors pulling their funds. Those investors able to get money out of the firm are no doubt relieved today, as reports emerge that about $700 million of MF Global's customer funds cannot be accounted for.
MF Global was "not in compliance" with rules that prohibit brokerage firms from commingling client funds with their own monies, the head of the Chicago Mercantile exchange said Tuesday. "While we are unable to determine the precise scope of the firm's violation at this time, we are investigating the circumstances of the firm's failure."
(Update: An MF Global executive has admitted to federal regulators that the company used clients funds as its troubles mounted, The AP reports. "It isn't clear whether the violations could lead to criminal charges. At a news conference, Manhattan U.S. Attorney Preet Bharara would not comment on whether a criminal investigation is underway.")
The revelations and subsequent investigation have generated allusions to Bernie Madoff's Ponzi scheme, while reports of CEO Jon Corzine's $12 million severance package will only further inflame populist anger in America.
But the critical story at MF Global is the firm's use of leverage, which turned a bad (or "untimely") bet into a deadly one.
Just as with Bear Stearns, Lehman Brothers, Long Term Capital Management and countless other firms, MF Global was ultimately doomed by leveraged -- in this case over $40 of liabilities for every $1 of assets.
"What happened to MF Global on Corzine's watch was not just incompetence. It was spectacular recklessness," as Henry Blodget writes. "It was the equivalent of aiming a 747 filled with people straight at the side of the mountain and hoping that, just before you smash into it, the prevailing winds will shift and enable you to pull up. And it's not as if Corzine didn't know the mountain was there."
While the legal question of whether MF Global commingled client funds with its own money remains under investigation, "what we know for a fact right now is the guy jacked up his firm 40-to-1 to buy magic beans," as my Breakout colleague Jeff Macke so eloquently puts it in the accompanying video.
"The guy" in this case being MF Global CEO Jon Corzine, the former NJ Governor and Senator, who joins the ranks of Robert Rubin, John Thain, Hank Paulson and other former Goldman executives who've found the going much tougher after leaving the venerable firm. The 'perils of post-Goldman life' is yet another storyline in MF Global's demise, as The NY Times' Andrew Ross Sorkin writes.
There's a related story here about Goldman being bigger than the sum of its parts as well as the political implications of Corzine being one of the biggest "bundlers", i.e. top fundraiser, for President Obama and other major Democrats.
But at the end of the day, the real story at MF Global is one of hubris, which -- as always -- is the deadliest sin.