MF Global $500 Million Pact Heralds Customer Payments

Former MF Global Chairman Jon Corzine
Former MF Global Holdings Ltd. Chairman Jon Corzine. Photographer: Andrew Harrer/Bloomberg

MF Global Inc. settled a legal dispute with a U.K. affiliate in a deal that will bring the failed brokerage $500 million to $600 million, allowing it to pay customers more money after a judge approves the settlement, a trustee said.

Announcing the agreement today with MF Global UK Ltd., trustee James W. Giddens said he had separately resolved conflicting claims with the MF Global parent formerly run by Jon Corzine, avoiding continuing litigation with the two affiliates. He has filed a request for approval of the pacts in U.S. Bankruptcy Court in Manhattan, where Judge Martin Glenn is handling the brokerage liquidation that was spurred by the eighth largest U.S. bankruptcy, filed in 2011.

“Resolving complex issues with these entities marks a critical milestone in administering the MF Global Inc. estate,” Giddens said in a statement e-mailed to Bloomberg. “We are now focused on court approval, satisfying the conditions to the agreements and making additional distributions.”

A U.K. trial over his $911 million in client claims against the London-based unit had been set for April.

Giddens didn’t say in today’s statement that commodity customers would get all of their money back, though he said the brokerage’s fewer securities customers might do so. Distributions would be made “as soon as possible” after court approval of the settlements, said Giddens, who has also been liquidating the Lehman Brothers Inc. brokerage since 2008.


He has paid the U.S.-based MF Global brokerage’s U.S. and foreign customers about $4.9 billion since the firm failed almost 14 months ago, and excluding the proposed U.K. pact had $1.2 billion in hand, out of $1.4 billion in remaining assets, according to data through Oct. 31 included in a report earlier this month. Most of the money in hand had to be kept in reserves because of fights with affiliates and customers, Giddens said.

Commodity customers shouldn’t expect to get paid in full unless Giddens wins key legal battles, he said at the time.

Among other fights, he has said he expects to sue insurers to try to recover $141 million in wheat futures losses by a trader in 2008, unless they agree to pay. He also has joined a lawsuit against executives including former New Jersey Governor Corzine, who headed the parent company, and continues to negotiate to recover more money from JPMorgan Chase & Co., Giddens said.

Allowed Claims

MF Global’s allowed 26,610 commodities customer claims have a total value of about $6.7 billion, according to the recent report. U.S. customers with allowed claims had about 80 percent of their assets back, while those with foreign futures accounts had received only 5 percent, the trustee said.

MF Global Holdings Ltd., the parent company, filed the eighth-largest bankruptcy in October 2011 after a $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations led to margin calls. Its bankruptcy filing listed assets of $41 billion and debt of $39.7 billion.

A trustee for the parent company, Louis Freeh, has been unwinding that company under Chapter 11 of the U.S. Bankruptcy Code in an effort to repay creditors.

Giddens is separately liquidating the brokerage to repay customers under the Securities Investor Protection Act. Each trustee has conducted his own probe into how the company failed and they have sometimes been at odds over whether certain sums belong to creditors or customers.

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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