A judge on Wednesday said MF Global Holdings Ltd. (MFGLQ) could continue using up to $21.3 million in cash collateral it has in accounts with J.P. Morgan Chase & Co. (JPM), after the parent of the liquidating brokerage satisfied the concerns of several parties, including J.P. Morgan itself.

Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan approved the use of the collateral, accepting language changes protecting the rights of creditors and brokerage customers, as well as a budget that spells out how MF Global can use the collateral. Judge Glenn had approved the use of some of the cash collateral at MF Global's first-day bankruptcy hearing.

"The funds in the account presumptively belong to the debtor," the judge said, referring to some brokerage customers' concerns that the money might actually belong to individual customers.

In a court filing, MF Global said it can use the collateral for operating expenses, fees owed to its trustee, and "reasonable restructuring expenses" including fees to professionals.

Judge Glenn overruled an objection by an organization called the Commodity Customer Coalition, which called for only $10 million of the cash collateral to be made available immediately with the rest of it held back for a later time.

One of the overarching problems many parties had with the cash collateral request is an estimated shortfall of $1.2 billion in the brokerage accounts of individual MF Global customers. Those customers, some of which are represented by the CCC, contend that there's no way to know whether some of the cash collateral is actually money that should be owed to customers.

Judge Glenn told a lawyer for the CCC that there was no proof that any of the money covered by the cash collateral belonged to customers, a contention the lawyer agreed with.

A lawyer for the trustee overseeing MF Global also said there was no evidence that any of the funds on deposit included customer property.

MF Global Holdings Ltd. filed for bankruptcy protection in late October and is now being overseen by Former Federal Bureau of Investigation Director Louis J. Freeh, who was appointed as Chapter 11 trustee in the case late last month. Its main operating arm, the brokerage, is being unwound by James W. Giddens Jr. under the provisions of the Securities Investor Protection Act.

Giddens, who hasn't backed down from his estimate that $1.2 billion could be missing from customer accounts, said for the first time last week that his office found "suspicious" transfers made from segregated accounts in the days leading up to MF Global's bankruptcy filing.

In Washington on Tuesday, CME Group Inc. (CME) Executive Chairman Terry Duffy told a Senate panel that former MF Global Chief Executive Jon Corzine may have known of a loan to one of the firm's European affiliates using segregated customer accounts, contradicting Mr. Corzine's own testimony earlier in the day.

 
 -Andrew Ackerman contributed to this article.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; joseph.checkler@dowjones.com

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