MF Global trustee plans to return more customer funds
(Reuters) - The trustee liquidating the brokerage unit of MF Global Holdings Ltd has asked a federal bankruptcy judge for permission to return remaining funds to U.S. customers who traded on domestic exchanges.
Wednesday's request by court-appointed trustee James Giddens would reallocate money earmarked for general unsecured creditors to customers of the brokerage, who have a higher-priority payback status. The move could bring closure to customers who have waited nearly two years to fully recover their money, which became tied up when MF Global went bankrupt on October 31, 2011.
Giddens has estimated that $1.6 billion went missing from customer accounts, mainly in the few days prior to MF Global's collapse, and that so far about 98 percent of the money has been returned to customers who traded on U.S. exchanges, and 74 percent to customers who traded on foreign exchanges.
"The relief sought in this motion, if granted, should allow every one of the more than 26,000 former customers of MFGI with allowed net equity claims to be paid in full before the end of the calendar year," attorneys for trustee Giddens said in a court filing.
MF Global was a commodities brokerage run by Jon Corzine, the former New Jersey governor and senator and a former Goldman Sachs chairman.
After its collapse amid exposure to risky European sovereign debt, regulators found that MF Global had tried to bridge its liquidity gaps in its hectic final days by improperly dipping into customer funds.
Giddens was tasked with recovering as much of that money as possible, including through settlements with MF Global counter-parties, including JPMorgan Chase & Co and CME Group Inc.
Last year, Giddens said there was still likely to be a hole in customer funds, and that he would seek to bridge it by reallocating money earmarked for non-customer unsecured creditors.
At the time, Louis Freeh, a separate trustee in charge of MF Global's parent entity, challenged whether Giddens had the authority to do that. The sides ultimately settled their differences, and Wednesday's motion seeks to establish that allocation. Continued...