Evan Dooley, a Memphis-based trader for the broker, is believed to have bet that wheat prices would decline, which market watchers will know is the exact opposite of what has happened in recent months.
With demand outstripping supply, wheat prices have gone through the roof.
According to the Times, Mr Dooley entered into around 4,000 futures contracts, which obliged him to deliver 20 million bushels of wheat at an agreed time and price.
Kevin Davis, MF Global's chief executive, said the "absolutely awful event" was only able to occur due to poor risk-control systems at the broker.
This enabled Mr Dooley to take unauthorised positions, trading with money from MF Global's account.
Mr Dooley has been sacked as a result of his actions and Mr Davis insisted that the broker's order-entry system has now been rectified.
Ironically, once the news broke the price of a bushel for May delivery reached a record-breaking $13.495.
Shares in MF Global dropped by $5.63 to $23.65 in midday trading.