Jon Corzine's bid to revive his Wall Street career crashed and burnt on Monday when his futures brokerage MF Global Holdings Ltd filed for bankruptcy protection following bad bets on euro zone debt.

Corzine, 64, who once ran Goldman Sachs before becoming a senator and then governor of New Jersey, had been trying to turn the more than 200-year-old MF Global into a mini Goldman by taking on more risky trades.

But once regulators forced it to disclose the bets on debt issued by countries including Italy, Portugal and Spain, the firm rapidly unravelled with no buyers willing to step in.

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday, a person familiar with the matter said. MF Global's shares plunged last week as the company's credit ratings were cut to junk.

Regulators had expressed grave concerns about the viability of MF Global, which filed for bankruptcy only after no viable alternative was available in the limited time leading up to the regulators' deadline, the company's COO, Bradley Abelow, said in a court filing.

Markets and regulators reacted swiftly to MF Global's troubles, which may have been exacerbated by Corzine's affinity for risk-taking over the course of a career that took him to the top echelons of Wall Street and then into politics.

They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face and brought the company down, said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.

RIPPLE EFFECTS

The bankruptcy is reminiscent of the collapse of Lehman Brothers in 2008 at the height of the financial crisis. But market participants said the impact from this collapse, far smaller, would likely be contained.

Still, MF Global's 2,870 employees, as well as trading counterparties, were left scrambling and confused on Monday, as MF Global halted its shares but did not file for bankruptcy until well after U.S. markets had opened.

Trading activity in U.S. gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions.

Ultimately it will have lost all confidence of its investor base, said Michael Epstein, a restructuring adviser with CRG Partners. I'm not sure what restructuring it actually does. In some respects, it's a baby Lehman, in effect.

There was also uncertainty over Wall Street's exposure.

JPMorgan Chase & Co's exposure for a $1.2 billion syndicated loan to MF Global is less than $100 million, a source at the bank said. Deutsche Bank is listed in the court filing as a trustee for bondholders with $1 billion of claims.

The banks declined to comment.

The impact on the markets should be smaller and nothing like when Lehman failed and hedge funds had money locked up with the firm for months, said Jeff Carter, an independent futures trader in Chicago.

At the Chicago Board of Trade, three traders wearing MF Global jackets were seen leaving prior to the opening of pit trading, and floor sources told Reuters they had been turned away after their security access cards were denied.

Back outside the Manhattan office, one MF Global employee said all he knew about the bankruptcy was what has been on TV. The company's HR department, meanwhile, was busy making calls withdrawing job offers it made in the past few weeks, according to a person familiar with the situation.

A sale here is potentially the best outcome for employees because the company will continue to operate as opposed to slowly winding down, said Dan McElhinney, the managing director of corporate restructuring for Epiq Systems.

I think there will be a lot of effort to tee up the sale pretty quickly here.

The New York Federal Reserve suspended MF Global from conducting new business with the central bank. CME Group Inc, IntercontinentalExchange Inc, Singapore Exchange Ltd and Singapore's central bank all halted the broker's operations in some form except for liquidations.

European clearinghouse LCH.Clearnet declared MF Global in default.

(This story was corrected in the first paragraph to correct Corzine's name)