No MF Global customer cash in JPM account: trustee

Fri Feb 17, 2012 5:10pm EST
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By Nick Brown

(Reuters) - The trustee managing the assets of bankrupt MF Global Holdings Ltd said none of the roughly $26 million being used to fund the futures brokerage in Chapter 11 is part of a $1.6 billion shortfall in customer accounts.

In a report issued on Thursday in U.S. Bankruptcy Court in Manhattan, trustee Louis Freeh said the money, which was in one of MF Global's account at JPMorgan Chase & Co, does not contain money that should have been segregated for customers.

The scope of the report does not extend to whether customer money could have ended up with JPMorgan through other transactions, or transfers, or in other accounts with the bank.

JPMorgan is a key player in MF Global's bankruptcy because it served as the agent for a $1.3 billion loan as well as the clearing bank for some of its transactions. Some customers have speculated that a significant chunk of their missing money could be with JPMorgan.

The most vocal of those customers, James Koutoulas, said Freeh's report applies only to one account, something he says many customers may not understand.

"Everyone's freaking out today," Koutoulas told Reuters. "Customers, people calling me, or going on Twitter. I just want to make it very clear that it's just one account. This has nothing to do with the far greater picture of the shortfall."

James Giddens, the trustee in charge of liquidating MF Global's broker-dealer unit, has estimated that about $1.6 billion is missing from customer accounts. He issued a report earlier this month chronicling the massive deficit, which he said was caused by the firm's use of customer funds to cover corporate transactions as liquidity demands tightened.

A portion of the shortfall is at the center of a dispute with the company's UK unit, while the rest could be with banks, clearinghouses, affiliates, and other parties who did business with MF Global in the days leading up to its October 31 collapse, Giddens said in the report.   Continued...

The sign marking the MF Global Holdings Ltd. offices at 52nd Street in midtown Manhattan is seen in New York November 2, 2011.  REUTERS/Shannon Stapleton