A JPMorgan Chase & Co. (JPM) unit’s $100 million settlement with MF Global Inc. liquidators won court approval, paving the way for the return of more money to the failed brokerage’s former customers.
The agreement will allocate $100 million for the return of customer property, according to an order entered today in bankruptcy court in Manhattan. The agreement resolves claims against JPMorgan arising from transfers of customer property in the days before MF Global entered bankruptcy, as well as its actions as one of the brokerage’s primary banks.
“The motion is granted in all respects and the settlement agreement is authorized,” U.S. Bankruptcy Judge Martin Glenn said in the order.
Former customers sued MF Global, New York-based JPMorgan and other parties over the firm’s collapse and James W. Giddens, trustee for the liquidating brokerage, joined the lawsuit. U.S. District Judge Victor Marrero is overseeing the class-action case while Glenn is handling the bankruptcy wind-down.
Giddens seeks to return an additional $200 million to customers from the settlement, which also recoups $29 million in MF Global funds held at the bank and completes a previous return of $417 million by JPMorgan. The bank will pay an additional $7.5 million to cover plaintiffs’ legal fees, according to court papers.
MF Global Holdings Ltd., the parent company once run by former New Jersey Governor and ex-Goldman Sachs Group Inc. (GS) Co-Chairman Jon Corzine, filed for bankruptcy in 2011 after a $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations. Most MF Global client funds were held in JPMorgan accounts, and the bank was a key lender to the parent before it collapsed in the eighth-largest U.S bankruptcy.
The agreement resolves all outstanding matters between JPMorgan and the MF Global estate, its customers and creditors. JPMorgan will get a $60 million general unsecured claim in the brokerage liquidation and the companies won’t pursue any other claims against each other, according to court papers.
JPMorgan was agent for a $1.2 billion loan to MF Global’s parent company before it failed and also loaned money to the brokerage and other affiliates, according to court documents.
The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The broker liquidation is In re MF Global Inc., 11-02790, same court. The class-action case is 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).
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