Henning-Carey Proprietary Trading LLC, a clearing firm and member of CME Group Inc. (CME), joined with eight traders in a suit in federal court in Chicago saying that $1.2 billion in missing money, or much of it, won’t be returned to brokerage customers. They seek to recover losses they and other traders had on their MF Global Inc. brokerage accounts as a result of the parent’s Oct. 31 bankruptcy.
The suit is one of several filed by brokerage customers and former employees against Corzine, MF Global executives or the company itself since the bankruptcy. Corzine told the House Agriculture Committee at a Washington hearing today that he “would never have intended” transfers from segregated accounts and had teams in place at the firm to ensure they didn’t occur.
He wouldn’t say if he and other executives were willing to share customers’ losses. Corzine and his executives were responsible for looking after customers’ segregated accounts, yet the money went missing as the company tried to salvage its business after “engaging in highly leveraged and speculative trading in foreign sovereign bonds,” the traders alleged.
The plaintiffs’ accounts were frozen along with about 38,000 others on Oct. 31, after “apparent segregation violations,” making it impossible for customers to access their accounts or the assets in them, they said.
MF Global trustee James Giddens, who is liquidating the brokerage, has transferred about 38,000 commodity accounts to other firms, and plans to sell 330 securities accounts, he said. Three transfers of collateral made and pending will give commodity customers about $4 billion of their assets, according to court filings.
The parent company’s Oct. 31 bankruptcy filing, the eighth- largest in U.S. history, listed assets of $41 billion.
Corzine, the former co-chief executive officer of Goldman Sachs Group Inc., quit as MF Global’s CEO on Nov. 4.
Andrew Levander, a lawyer for Corzine, didn’t immediately respond to an e-mail seeking comment on the lawsuit.
The traders also are seeking punitive damages and legal costs after a jury trial.
The case is Henning-Carey v. Corzine, 11-cv-08717, U.S. District Court, Northern District of Illinois (Chicago).
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