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MF Global Trustee to Return $685 Million to Customers

A trustee for the MF Global Inc. brokerage, in response to customer objections to its plan to distribute to them another $685 million, said the distribution won’t force them to give up claims against unknown parties, or hold them to other undefined conditions.

The trustee, James Giddens, said in court papers filed in Manhattan bankruptcy court today that the agreement “does not and will not alter or limit any rights a customer has” against third parties other than specific individuals named in the agreements, Giddens said.

He also addressed separate allegations from creditors of MF Global Holdings Ltd. Creditors had said last week that Giddens wasn’t helping with a global analysis of books and records, and listed 13 items of value to the bankrupt estates.

“The allegations -- while wholly irrelevant to this motion -- include references to meetings, discussions, and exchanges of information from which the Chapter 11 committee has largely been absent and are inaccurate,” Giddens said.

Own Trustee

While MF Global Holdings is unwinding in bankruptcy to repay creditors, its former operating unit, brokerage MF Global Inc. (MFGLQ), is liquidating under the Securities Investor Protection Act to repay customers who are estimated to be out $1.6 billion. The holding company and brokerage each have their own trustee, and the two have disputed whether certain assets belong to customers or creditors.

The planned distribution to customers will give some of them a return of about 80 percent. Commodity customers who traded futures on foreign exchanges will get their first payments of about $50 million, while about $600 million will go to customers who traded on U.S. exchanges, Giddens said today in a statement. Holders of physical assets such as precious metals are in line to get about $35 million.

MF Global Holdings Ltd. filed the eighth-largest U.S. bankruptcy on Oct. 31 with debt of almost $40 billion after making $6.3 billion in bets on sovereign debt and getting margin calls.

Jon Corzine, chairman of MF Global Holdings until his resignation on Nov. 4, has said he didn’t authorize any misuse of customer money that may have occurred. Corzine is a former governor of New Jersey and former co-chairman of Goldman Sachs Group Inc. (GS)

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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