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MF Global Customers Call Trustee’s Demands ‘Unwarranted’

MF Global Inc.’s trustee asked futures customers to release claims on the defunct brokerage in return for money they are owed, demanding an “unwarranted” transfer of legal rights, a group of customers said.

The customers, including William Fleckenstein, Thomas Wacker and Summit Trust Co., said in a court filing yesterday that they were notifying the judge supervising the firm’s liquidation of their “concern” in case he wasn’t aware that trustee James Giddens had mailed his demands to some customers along with his determination of their claims. One of Giddens’s demands may require customers to release claims made in class-action lawsuits, they said.

“It may be interpreted to release claims being asserted in the numerous class action lawsuits filed by aggrieved customers,” the customers said in the filing. “It could also potentially be asserted as a bar to recovery by some or all of the defendants joined in these lawsuits, including claims in the suits against parties alleged to be responsible for the misappropriation of customer funds.”

MF Global futures customers including Fleckenstein, a Seattle money manager, have filed at least seven separate suits against Jon Corzine, the parent company’s former chief executive officer, over the alleged theft of their assets, according to filings in federal court in Manhattan. Giddens has said there is a gap of at least $1.6 billion between funds he can obtain and commodity customers’ claims.

Detailed Objections

Kent Jarrell, a Giddens spokesman, didn’t immediately respond to an e-mail seeking comment on yesterday’s filing. The futures customers will publish a detailed account of their objections to Giddens’s request later, they said in the filing in U.S. Bankruptcy Court in Manhattan.

MF Global Holdings Ltd., the brokerage’s parent, filed the eighth-largest U.S. bankruptcy on Oct. 31 with debt of almost $40 billion after making bets on sovereign debt and getting margin calls. Corzine, a former governor of New Jersey and former co-chairman of Goldman Sachs Group Inc., has said he didn’t authorize any misuse of customer money that may have occurred.

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). The main investor case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).

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