MFGI trustee affirms customer property and priority status

The Trustee for MF Global's SIPA liquidation proceeding filed an omnibus reply to objectors yesterday in which he clearly defined customer property and affirmed the super-priority status of segregated customer funds that the CCC has sought since its inception. The reply defines customer property as not only “all segregated funds, but also all property that was unlawfully converted and is property of the debtor’s estate, and if there is shortfall in customer segregated assets, all other property of the debtor’s estate.” The Trustee’s reply goes on to state that “there is virtually no scenario under which any property of MF Global’s estate would be treated as non-customer property in the event of commodity customer shortfall.” Read the full reply here:

For the first time since the bankruptcy proceeding began, the Trustee has affirmed that commodity customers will have a right to claw back assets of MF Global’s estate in the event of a shortfall of funds. Prior to this filing, the Trustee indicated that a shortfall in customer property would result in a ratable distribution of loss to customers and that their claims would be treated in the bankruptcy proceeding as claims of unsecured creditors. The CME filed a reply in support (read in full here:

CCC Attorney and Co-founder James L. Koutoulas, Esq. issued the following statement:

We believe Judge Glenn will agree with this reply and this paves the way for customers to be made whole from the assets of MF Global Holdings’ estate. This is a major reversal due in large part to the efforts of the CCC and other customers. However, strangely silent in court is the CFTC. They have filed nothing to help customers despite Commissioners’ proclamations that their prime concern is for the customers. They need to get into the trenches of the courtroom and help lead the fight instead of leading from behind.

Mr. Koutoulas and CCC co-founder John Roe will attend the hearing of the House Agricultural Committee today and are scheduled to appear on Bloomberg News at 10:20 AM EST. The two spent all day Wednesday meeting with members of Congress and staff regarding the frozen assets of MF Global customers.

Mr. Roe added:

We are closer to our stated goal of the return of 100% of customer segregated funds. Going forward, we will work with Congress to enact sensible, market-driven reforms to mitigate the impact of future FCM bankruptcies.

Mr. Koutoulas will return to New York tonight for a court appearance Friday to argue the CCC’s motion objecting to JP Morgan’s use of cash collateral and to argue in support of customers’ super-priority rights over MF Global Holdings assets. Mr. Roe will remain in Washington to work with members of Congress.

Motion filed by MF Global Trustee

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