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MF Global Shortfall May Be More than $1.2B, Says Trustee

According to trustee James Giddens, MF Global Inc. may have a greater than $1.2B shortfall in US segregated customer accounts. Giddens has been tasked with overseeing the failed company’s liquidation.

Previously, the estimated shortfall had been $593 million. Now, however, that estimate has likely changed. Giddens says that it will take $1.3 billion to $1.6 billion dollars to distribute 60% of what should have been found in the accounts of customers. He has noted that how much of the assets he can access is not the same as the shortfall amount. Giddens is reportedly close to exhausting the money that he does control.

$5.45 billion in money from customer accounts were frozen on the last day of October, one day after an MF Global unit reported that client funds (Commodity Futures Trading Commission rules say these should have been segregated) had experienced a material shortfall. Parent company MF Global Holdings Inc. then sought bankruptcy protection.

Since then, Giddens has gained control of $3.7 billion from MF Global Inc.’s US depositories. About $520 million in cash is going back to customers while $1.5 billion in collateral has already been distributed.

The SEC, the CFTC, and the US Justice Department are looking at cash movements that took place at the financial firm before it filed for bankruptcy.

According to, former FBI director Louis Freeh is now the Chapter 11 trustee in the Mr Global Holdings Ltd. bankruptcy. The appointment comes after creditors and the company called for one person to take charge of recovering assets.

Meantime, US lawmakers plan to take a closer look at the relationship between ex-MF Global Holdings Ltd. Chief Executive Jon S. Corzine, who used to run Goldman Sachs Group Inc., and the credit ratings agencies (Standard & Poor’s, Moody’s Investment Services, and Fitch Ratings) that downgraded the brokerage firm as it moved toward bankruptcy. They want to see if Corzine’s start status may have influenced the rating firms.

It wasn’t until just days before MF Global filed for bankruptcy protection that Fitch and Moody’s reduced their investment grade ratings on the brokerage firm. Moody’s downgraded it to the brink of “junk” on October 24. Standard & Poor’s only downgraded its rating of MF Global after the bankruptcy filing.

Marketwatch recently reported that MF Global clients who want their money back are not taking this situation lying down. A new group, called the Commodity Customer Coalition, is now representing clients with over 7,000 MF Global accounts. Its members are ready to lobby Washington for help. BTR Trading Group principal John Roe, who started the group, says that more than $10 million of his own funds and clients’ monies are somewhere in MF Global.

If you cannot access your money in the wake of MF Global’s bankruptcy filing, please contact our stockbroker fraud lawyers today.

MF Global may come up $1.2B short, trustee says, Investment News, November 21, 2011
MF Global’s Bankruptcy Trustee Set to Be Ex-FBI Director Freeh, Bloomberg, November 26, 2011
MF Global customers taking case to Washington, MarketWatch, November 25, 2011
Rating Firms’ MF Global Role to Be Explored, The Wall Street Journal, November 25, 2011

More Blog Posts:

MF Global Holdings Clients Unable to Access Their Money Following Chapter 11 Bankruptcy, Stockbroker Fraud Blog, November 16, 2011
MF Global Holdings Ltd. Files for Bankruptcy While Its Broker Faces Liquidation and Securities Lawsuit by SIPC, Institutional Investor Securities Blog, October 31, 2011
UBS Financial Services Fined $2.5M and Ordered to Pay $8.25M Over Lehman Brothers-Issued 100% Principal-Protection Notes, Institutional Investor Securities Blog, April 12, 2011

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