MF Global Trustee Seeks More Payments To Commodities Clients
March 15 2012 - 1:53PM
Dow Jones News
The trustee overseeing the liquidation of MF Global Holdings
Ltd.'s (MFGLQ) brokerage Thursday proposed additional payments to
commodities clients of the failed broker-dealer, including the
first to those with accounts frozen on non-U.S. exchanges.
The trustee asked the bankruptcy judge overseeing MF Global to
approve a further distribution of up to $685 million, adding about
10 cents on the dollar to the existing recovery target of a 72
cents for funds held by customers on deposit with the failed
firm.
James Giddens, the trustee unwinding MF Global's U.S. brokerage
business, has recovered about $5.3 billion of the nearly $6 billion
in futures customers' segregated funds held at the brokerage.
To date, he has returned about $3.9 billion to customers via a
series of bulk transfers arranged by CME Group Inc. (CME) in the
weeks following MF Global's demise last year.
The latest request includes around $600 million held as
segregated assets for clients trading on U.S. exchanges and another
$50 million to so-called 30.7 customers related to U.S. customers
trading overseas. An additional $35 million of customer property is
earmarked to a domestic delivery class, which Giddens identified as
physical customer property that has been or will be reduced to
cash.
An estimated $1.6 billion in client assets remain out of reach,
with some money missing and other funds held up by proceedings in
other countries.
"If [the trustee] doesn't recover any more, the shortfall is
probably going to be right in the range of the high 80s or perhaps
the low 90s, in terms of recovery," said Vince Lazar, a partner
with law firm Jenner & Block, which is representing CME in the
bankruptcy proceedings. Lazar was speaking Wednesday at a futures
industry conference in Florida.
In all, about 25,000 commodities customers have filed claims
with the trustee. The unaccounted-for funds include $900 million
linked to U.S. commodity trading accounts as well $700 million tied
to foreign-based accounts, believed to be in the U.K.
Distressed investors have been offering some MF Global U.S.
customers up to 90 cents on the dollar for their so-called 4d
claims, betting Giddens can boost their recoveries by clawing back
assets from MF Global's U.K. estate and others while fending off
claims from his rivals, which include MF Global's U.K.
administrators and the holding company's Chapter 11 trustee, Louis
Freeh.
Still, Giddens faces serious challenges in getting back the
remaining funds. Although he recently said he traced a majority of
the transactions made by MF Global during its final week in
October, he noted that actually recovering the cash could prove
difficult and will take time.
MF Global collapsed Oct. 31, 2011, revealing the gap in client
money that the firm was supposed to have safeguarded under U.S.
commodity market law. Regulators and investigators have yet to
provide a full explanation for the shortfall or where the money
wound up.
Giddens is winding down MF Global's broker-dealer business under
the authority of the Securities Investor Protection Act, which
governs the liquidation of failed brokerage firms.
-By Doug Cameron and Patrick Fitzgerald, Dow Jones Newswires;
312-750-4135; doug.cameron@dowjones.com
-Jacob Bunge contributed to this story.
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