NEW YORK (The Wall Street Journal) - It took only seven hours early on Wednesday for a trader at MF Global Ltd. to make bad bets on the direction of wheat prices that cascaded into $141.5 million in losses at the brokerage firm and exposed another breakdown in Wall Street's risk management.

Thursday's announcement of the ill-fated trades was an embarrassment for the Bermuda-based futures and derivatives firm, which suffered a 28-percent drop in its share price. It was the steepest decline since MF Global was spun off last year from hedge-fund giant Man Group plc., and the blowup raised questions about how one of the largest customers on several futures exchanges could have left itself so exposed to a single trader's bets.

MF Global identified the trader as Evan Dooley, who worked in the firm's Memphis, Tennessee, office until he was fired for having "substantially exceeded his authorised trading limit".

In an interview, the 40-year-old Mr. Dooley, who goes by his middle name, Brent, blamed the trading loss on the computer systems he was using. That system "failed on a lot of things," he said, including problems in "setting limits." He declined to be more specific.

MF Global insisted that the breakdowns resulting in the steep loss were isolated and have been fixed. But Kevin Davis, the brokerage's chief executive, acknowledged that existing internal controls could have stopped Mr. Dooley's trades from being processed - but were turned off in a few cases to allow for speedier transactions by brokers at the firm who traded for themselves or took customer orders by phone.

"This is an absolutely awful event, but we believe it was an aberration in our risk controls. We believe that we have fixed it," Mr. Davis said. The firm has hired FTI Consulting Inc., of Baltimore, to review its risk-management procedures.

Mr. Dooley, who has spent more than 15 years in the rough-and-tumble business of commodities trading, had just one customer, and that person had not done any trading business with Mr. Dooley in "some time," Mr. Davis said. But the trader was allowed to process trades for his own account through MF Global, which collected commissions on those transactions. Such arrangements are common in futures trading, even though the brokerage firms essentially must use their own capital if traders cannot afford outsize bets that go wrong.

Mr. Dooley, who joined the firm in November 2005, was betting that wheat prices would fall from their recent highs, according to a person familiar with the situation. Wheat and other commodities have surged in recent weeks because of strong demand, tight supply and a cash infusion from investors.

Mr. Dooley entered into the trades between midnight and 7am Eastern time on Wednesday, according to the company, which said he placed orders for about 15,000 to 20,000 futures contracts, including March contracts and "a number of other contracts."

The trades were not made from the brokerage firm's Memphis office. Mr. Dooley often traded from his home in Olive Branch, Missouri, where he lives with his wife, according to Mr. Dooley's father, Evan Dooley. "He's not a big trader. He's not a rogue trader," said Mr. Dooley after speaking with his son several times on Thursday. "He's a day trader. If he made $1,000 a day, that was a good day."

MF Global's risk-management procedures include "buying power controls" that are supposed to flag big or risky trades that might expose the firm to potential losses. But those internal controls were sometimes turned off at the Memphis office and possibly other locations in order to speed trades. The surge in commodities-trading volume has created pressure on brokerage firms to keep up.

CME Group Inc.'s Chicago Board of Trade handled Mr. Dooley's orders. By Wednesday morning, though, wheat prices were moving sharply higher, meaning that Mr. Dooley was suffering losses that far exceeded the balance in his own trading account. Since his account was depleted, MF Global was forced to step in and fund the trader's losing position.

"It happened very quickly," Mr. Davis said in a conference call. Mr. Dooley did not have the capital "to support even a fraction of his positions."

Some said MF Global's buying binge pushed wheat prices higher and fueled heavy trading Wednesday. It took several hours to undo Mr. Dooley's trades, but Mr. Davis played down their role in price moves. Floor trading of futures occurs in the daytime, while electronic trading through CME is during the day and from 6pm to 6am Central time.

The MF Global mess was "certainly the main thing" that caused the market to gyrate on Wednesday, said Vic Lespinasse, analyst for Illinois Grain. The most actively traded May wheat contract surged by the CBOT-imposed limit of $1.35 a bushel.

Covering Mr. Dooley's positions cost MF Global $141.5 million in cash, or about $80 million on an after-tax basis. That is equal to about 6 percent of the brokerage firm's capital - and exceeds the company's net income in the fiscal third quarter ended December 31. Some of the loss might be recovered from insurance companies or mitigated by reduced bonuses at the firm, but getting the money from Mr. Dooley is not likely. The trader "doesn't appear to be terribly long of assets," Mr. Davis said.

National Futures Association records show no prior regulatory problems for Mr. Dooley. It is not clear if he will face disciplinary action from regulators stemming from his wheat-futures trades. The Commodity Futures Trading Commission (CFTC), which regulates US futures markets, is looking into the situation. In a statement, the CFTC said the problem "appears to be an isolated event."