MF Global accord, once thought unlikely, goes before U.S. judge

Wed Jan 30, 2013 4:48pm EST
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By Nick Brown

NEW YORK Jan 30 (Reuters) - A year ago, the bankruptcy of MF Global, the collapsed brokerage run by former New Jersey Governor Jon Corzine, seemed like it would be a long and messy affair involving plenty of courtroom drama around the world.

But that was before a surprising meeting of minds between court-appointed administrators in the United States and Britain, and the cooperation of Louis Freeh, former director of the FBI, who is the trustee representing MF Global's creditors.

That led to a proposed settlement, expected to get a judge's sign-off on Thursday, that would give MF Global's U.S. customers 93 percent of their money back - a figure many thought unlikely when the meltdown happened in October 2011.

When MF Global collapsed, regulators found an estimated $1.6 billion hole in customer accounts at its U.S. broker-dealer unit and determined the money had been improperly used to cover corporate needs.

Most of the firm's assets were scattered in subsidiaries around the globe. That resulted in billions of dollars in legal claims between the company's entities, with the interests of broker-dealer customers competing with those of the bankrupt parent's financial creditors.

The bankruptcy world was still immersed in the collapse of Lehman Brothers, which was in the third year of its epic Chapter 11 and today remains embroiled in a slew of lawsuits. While its capital structure was larger and more complex than MF's, Lehman nonetheless painted a clear picture of how complex, transatlantic bankruptcies can devolve into years of litigation.