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MF Global Should Give Priority to Broker Claims, Funds Say

MF Global Holdings Ltd. should give priority to brokerage claims, funds including Sapere Wealth Management LLC told a federal judge today in court papers.

They requested the court rearrange MF Global’s bankruptcy so that commodity customers of its brokerage get priority for their claims.

Changing the parent’s bankruptcy to benefit customers of the MF Global Inc. brokerage would affect the judge’s decisions on the parent’s use of cash, Sapere said. The parent currently has permission to use the cash until Dec. 9, when the judge is due to revisit the matter.

The company needs the money to pay employees and cover real estate and technology costs, according to court papers. Projected cash outflows for the company and affiliates are $11.8 million through Jan. 6 and would leave a balance available for use of $3 million on that day, according to filings.

James Giddens, the trustee liquidating the brokerage, has transferred about 38,000 commodity accounts to other firms, and said he plans to sell 330 securities accounts. Three transfers of collateral made and pending will give commodity customers about $4 billion of their assets, according to court filings.

The shortfall in the MF Global brokerage’s U.S. segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, Giddens has said. That would mean customer accounts are missing about 22 percent of their total of $5.4 billion.

The parent company’s Oct. 31 bankruptcy filing, the eighth-largest in U.S. history, listed assets of $41 billion. Jon Corzine, the former co-chief executive officer of Goldman Sachs Group Inc., quit as MF Global’s CEO on Nov. 4.

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).

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