MF Global unit may have moved customer funds, creditors say

Claim that trustee isn’t helping with a global analysis

April 6 (Bloomberg) -- Creditors of MF Global Holdings Ltd. said its failed brokerage unit may have transferred $717 million in customer funds to eight institutions in October, and that a trustee for the unit isn’t helping with a global analysis of books and records.

Creditors also identified 13 potential items of value in the status update filed in Manhattan bankruptcy court yesterday. One is $290 million of non-customer money that was held by the brokerage as of Jan. 1. Another potential asset is $875 million that MF Global Holdings gave to the brokerage in the days before its Oct. 31 collapse, creditors said.

While MF Global Holdings is unwinding in bankruptcy to repay creditors, its former operating unit, brokerage MF Global Inc., is liquidating under the Securities Investor Protection Act to repay customers who are estimated to be out $1.6 billion. The holding company and brokerage unit each have their own trustee, and the two have disputed whether certain assets belong to customers or creditors.

“Lack of SIPA Trustee participation is a major hurdle,” the creditors said in the report. MF Global Holdings has concluded it “is unlikely that support from global affiliates is forthcoming” in closing the books and records to give a picture of where the company’s finances stood at Oct. 31, the creditors said. The SIPA trustee is James Giddens, while the trustee for the holding company is Louis Freeh.

Kent Jarrell, a spokesman for Giddens, didn’t immediately return a call seeking comment on the report.

MF Global Holdings, run by former Goldman Sachs Group Inc. co-chairman Jon Corzine until his Nov. 4 resignation, filed the eighth-largest U.S. bankruptcy 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.

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).

Bloomberg News

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