Regulator pulls out of MF inquiry

The head of the agency in charge of regulating MF Global, the collapsed broker-dealer, has recused himself from the investigation into the bankruptcy, because he worked with the firm's chief executive, Jon Corzine, at Goldman Sachs.

The close ties between Mr Corzine and Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), also include significant donations Mr Gensler made to Mr Corzine's political campaigns.

The CFTC is examining whether Mr Corzine and MF Global acted improperly during the death spiral of the firm two weeks ago, by dipping into clients' funds to try to prop up the firm. More than $600m (£374m) which should have been in client accounts is unaccounted for, regulators said last week. MF Global collapsed after trading partners abandoned the firm on news it had placed a $6.3bn bet on eurozone debt.

Mr Gensler spent 18 years at Goldman Sachs, on the trading side of the business. He rose to become a co-head of finance, before moving into the public sector. Mr Corzine, also from the trading side of Goldman Sachs, was ousted as co-chief executive in 1999 and went on to become Governor of New Jersey.