Banks Hold $1 Billion in MF Global U.K. Cash, KPMG Says

Banks Hold $1 Billion in MF Global U.K. Client Cash, KPMG Says
MF Global Inc. signage is displayed at 60 East 53rd Street in New York. Photographer: Stephen Yang/Bloomberg

About $1 billion of MF Global Holding Ltd. U.K. clients’ money remains locked away in other financial institutions five months after the brokerage’s collapse, administrators KPMG LLP said.

KPMG has collected more than $500 million from those accounts to date, the firm said in an update published on its website. The figures relate to unsegregated client accounts, which MF Global was allowed to mix with its own funds and which have proved difficult for the administrators to recover.

KPMG said it was taking action to obtain the $1 billion of unsegregated assets from a “small number of financial institutions” that it didn’t identify. The firm threatened to sue banks that don’t hand over funds, it said at a London creditors meeting in January.

KPMG, appointed to wind up the London-based unit when the New York-based parent filed for bankruptcy in October, plans to produce statements setting out the account positions of 75 percent of customers by March 30. MF Global was the fifth-largest financial company to file for bankruptcy when it sought protection on Oct. 31 after getting margin calls on its bets on European sovereign debt.

Metal Exchange Customers

MF Global customers that traded on the London Metal Exchange are unlikely to receive statements until April because of the complexity of their positions, KPMG said.

KPMG is involved in a $700 million dispute over customer money with James Giddens, the trustee for MF Global’s New York brokerage. Giddens claims the money was held in the U.K. for the New York unit’s customers and wants to be paid from a pool of protected accounts.

“We are currently working with” the U.S. trustee to “reconcile the universe of claims and counterclaims,” KPMG said in its update to clients this week.

The U.S. brokerage liquidation case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan).

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