The motion states, “The Trustee envisions including the distribution of physical assets (warehouse receipts, precious metal certificates and the like) with this third bulk transfer; however, the books and records of MFGI related to the physical assets are not yet in a position to guarantee that the pro rata distribution of physical assets will take place at the same time as liquid assets.”
It is hard to know how the trustee would distribute two thirds of a certificate, let alone a gold bar. It is unclear whether the value of those physical holdings have been included in the trustee’s calculation. If it is, it could explain the anomaly and why the trustee estimates the shortfall to be larger than first reported. However, the certificates according to Schneider, are simply an entry on a statement with a listed value of zero.
The bulk transfer would “true-up” the distribution to all customers according to the trustee. The first transfer moved positions and roughly 60% of the customer margin capital. The second transfer provided “cash only” customers who had no positions on Oct. 31, and thus received none of their cash, a 60% distribution.
Left out were customers who had only marginal positions and were mostly in cash. It also left out so called “Trade to Zero Accounts,” which were accounts that liquidated positions after the filing when MFGI was placed on liquidation only. Also receiving funds would be customers that attempted to liquidate their accounts in the days preceding the bankruptcy only to have MFGI check bounced.