Judge OKs release of $520M to MF Global customers

AP News
Posted: Nov 17, 2011 4:42 PM
Judge OKs release of $520M to MF Global customers

The judge overseeing the bankruptcy of collapsed MF Global Inc. has approved the release of about $520 million to trading customers of the brokerage firm whose accounts have been frozen since Oct. 31.

U.S. Bankruptcy Judge Martin Glenn issued an order Thursday granting the request of the court-appointed trustee that 60 percent of the funds in about 23,300 cash-only accounts be returned to customers as a group.

The money could start moving to customers before Thanksgiving, a spokesman for the trustee says. The complex process of combing through about 38,400 frozen accounts holding some $5.4 billion to verify balances has taken longer than planned.

Trustee James Giddens has a goal of eventually returning 100 percent of all funds to customers, though that could be reduced by the apparent shortfall of clients' funds. An estimated $593 million of customers' money is still missing.

"The trustee is striving to get (funds returned) to the most people as soon as possible," said Kent Jarrell, a spokesman for Giddens.

New York-based MF Global was led by Jon Corzine, former New Jersey governor, U.S. senator and CEO of Wall Street powerhouse Goldman Sachs. MF Global collapsed after making a disastrous bet on European debt. It filed for bankruptcy protection on Oct. 31.

The Commodity Futures Trading Commission and other regulators are investigating whether the firm used money from clients' accounts as its own financial condition worsened. That would be a violation of securities rules. The FBI is also investigating whether MF Global violated any criminal laws.

The cash accounts are being transferred to customers through the Chicago Mercantile Exchange. The company that operates the exchange, CME Group, has been reviewing the accounts with staff of the CFTC and Giddens's office. CME originally set a deadline of Nov. 8 for releasing $1.45 billion in roughly 15,000 commodity futures trading accounts. It began to be released on a rolling basis on Nov. 9.

Customers use those accounts for trading derivatives. The value of derivatives is based on the value of an underlying asset, such as interest rates, oil prices or currency rates. MF Global was one of the biggest players in the derivatives market.

CME oversees companies like MF Global that trade on its exchanges. In a statement issued Thursday, CME said it followed CFTC requirements and exchange rules in the review of accounts.

On Wednesday CFTC Commissioner Scott O'Malia called for tighter oversight of the futures industry in the wake of the MF Global affair. New measures are needed to restore "shaken public confidence," he said.