With this latest twist, the MF Global scandal officially got real.

MF Global, the failed securities firm led by Jon Corzine, admitted using clients’ money as its financial troubles mounted, a federal official says.

An MF Global executive admitted that to federal regulators in a phone call early Monday after regulators discovered money missing from clients’ accounts, according to an official familiar with the conversation.

The official spoke on condition of anonymity because he wasn’t authorized to discuss an investigation by federal regulators.

Government rules require securities firms to keep clients’ money and company money in separate accounts. Violations can result in civil penalties.

Basically, there is a wall between depositors and the company account at the level of brokerage firms, which there really isn’t for federally insured banks. If there’s an admission, it’s a dead-to-rights violation of the law, and could trigger not only civil but criminal charges.

Heckuva job, Jon Corzine!

It’s a little jarring to hear that there’s a private company called CME Group Inc. which operates the exchanges on which MF Global traded derivatives, and that they announced that MF Global was “not in compliance” with standards of the exchange. But regardless, this violates CFTC guidelines as well, and other federal laws. And this revelation puts the confidence of the entire futures contracts trading system at risk, not that I believe that to be a huge loss.

MF Global did not keep customer accounts separate from the firm’s funds, CME Chief Executive Craig Donohue said on a conference call. Asked if CME’s clearinghouse would be on the hook for losses, Donohue said that it would not be. But the same may not go for customers, he said.

“I’m sure that customers of MF Global are not feeling very good right now, and (are) madly investigating their rights and the facts of this case,” said Michael Greenberger, a former director of the CFTC’S trading and markets division, and a University of Maryland law professor.

CME is MF Global’s main exchange regulator and is responsible for ensuring that its clearing members stay in compliance with rules on customer funds.

“We do have a big problem with a hole in the segregation, and that is a serious first-of-a-kind problem that we’ve ever seen here,” a source familiar with the CFTC told Reuters. “We’re trying to figure out what MF Global did with it and where is it.”

Experts are still assuring everyone that this won’t look like Lehman. But it reflects the colossal screw-up that is our gambling casino masquerading as a financial system.