WASHINGTON (AP) -- He set out to create a mini-Goldman Sachs. In the end, he built a mini-Lehman Brothers.
Former New Jersey Gov. Jon Corzine's resignation Friday from the securities firm he led capped a week of high drama and swift failure.
MF Global collapsed into bankruptcy last week, and Corzine has since hired a criminal defense attorney amid an FBI investigation into the disappearance of hundreds of millions of dollars in client money.
MF Global's implosion, which came after Corzine made a big, risky bet on European debt, revived memories of the 2008 banking crisis and the ruin of the much bigger Lehman.
As Corzine, 64, stepped down as chairman and CEO, he said he felt "great sadness about what has transpired at MF Global." Corzine, who ran the investment firm Goldman Sachs years before joining MF Global, said his resignation was voluntary and called it "a difficult decision."
Regulators said more than $600 million in client money is still missing. They said MF Global apparently moved the money out of client accounts within days as the company's cash dried up.
The FBI is examining whether the firm's actions amounted to a crime, two people familiar with the situation told The Associated Press this week. They spoke on condition of anonymity because they were not authorized to discuss the matter publicly. The New York Post reported that U.S. Attorney Preet Bharara in New York City is also investigating.
News reports have raised the possibility that the missing money could be at JPMorgan Chase & Co., which acts as a middleman when MF Global trades securities.
JPMorgan issued a statement Friday saying it had been "wholly transparent" about money from MF Global. But it said it didn't know whether it held any of MF Global's missing clients' money.
Corzine's resignation doesn't untangle him from MF Global's affairs. The trustee overseeing the liquidation of its brokerage gained permission Friday to subpoena top executives, including Corzine.
Corzine has hired prominent defense attorney Andrew Levander of New York, according to a person familiar with the situation.
Securities firms such as MF Global are supposed to keep their own money separate from their clients'. That way, clients can retrieve their assets easily if the company fails.
MF Global has maintained that the missing customer money is being held up by trading partners that froze its accounts as it teetered last week.
The Corzine era at MF Global began in March last year.
Seeking to raise MF Global's profile and expand its business, he sought help from former Goldman Sachs colleagues in New York and Washington.
In February, he successfully lobbied the Federal Reserve Bank of New York to make MF Global one of only 22 banks authorized as primary dealers of U.S. Treasury securities. The New York Fed's president and CEO, William Dudley, was a partner at Goldman until 2007.
Corzine later lobbied his company's main regulator, the Commodity Futures Trading Commission, on new rules, including one related to the handling of client money. He held a call with former Goldman colleague and CFTC Chairman Gary Gensler in July, according to public records.
Corzine, who served one term in the U.S. Senate before being elected governor in 2005, also saw investment opportunity as the European debt crisis unfolded.
European bonds were paying higher returns than debt issued by other nations, and Corzine believed European leaders would back their countries' bonds and prevent them from losing value.
So MF Global decided to buy European government debt, much of it Italian. By the end of 2010, the firm had placed big bets - and did so with borrowed money. To raise the money, it turned to a common financing technique called repurchase agreements. In the end, it proved fatal.
On the surface, a repo agreement seems like a wise way for a firm to borrow. In exchange for cash, the borrower sells its lender a security such as a government bond with a proviso: It will buy back the security when the loan comes due.
The security acts like collateral for the loan. If the price of the security doesn't move much, the loan seems safe.
But in MF Global's case, the securities were European government bonds. And by June, regulators were growing worried about those bonds.
The Financial Industry Regulatory Authority, a private regulator that oversees brokers, demanded MF Global hold more of a financial cushion against possible losses on its European bets. One fear: If the bonds fell in value, lenders would demand more collateral from MF Global. That could lead others to demand collateral.
It would all amount to a classic - and deadly - bank run. As it turned out, that's just what happened.
First came reports from news organizations and Wall Street analysts raising questions about MF Global's wagers on Europe. Then Moody's and other rating agencies downgraded the firm's creditworthiness.
Fear among MF Global's lenders and trading partners mounted, and panic set in. MF Global's stock price plunged. The firm lost business. Customers began pulling their money out, leaving the firm with little cash of its own.
In the end, as with Lehman and the collapsed hedge fund Long Term Capital Management, it wasn't so much what the firm bought that sped its downfall. It was the way it did so, with borrowed money.
Those trades were not the first time MF Global suffered from faulty risk management. It was fined $10 million in 2009 by the CFTC for failing to spot a rogue trader.
Two questions overhanging the company and its creditors: Will the Securities and Exchange Commission and the FBI discover evidence that this scramble for cash led MF Global to break the law and raid customers' accounts? And will Corzine himself become a focus of the criminal investigation?
As the investigations proceed, MF Global said lead director Edward Goldberg and president and Chief Operating Officer Bradley Abelow will continue in their current positions.
At the same time, MF Global's fall has shined a spotlight on Gensler, the top federal regulator investigating the matter.
Gensler long ago built close ties to Corzine - and eventually worked for him - as they rose through the ranks of Goldman Sachs. Later, they collaborated on Capitol Hill to pass an anti-corporate fraud law.
Corporate governance experts said Gensler's ties to Corzine posed an apparent conflict of interest that could taint the probe's findings. Some have said he should remove himself from the investigation.
Sen. Charles Grassley, R-Iowa, who sits on the committee that oversees Gensler's agency, said Friday that even after Corzine's exit from MF Global, "It's hard to see how the commission chairman could be completely objective in looking out for wronged investors when he has such strong ties to the principal of the failed firm."
"It seems recusal would be the best outcome for investors," the senator said.
Condon reported from New York.