April 24 (Bloomberg) -- A trustee for MF Global Inc., the failed brokerage, can distribute $685 million more to customers, bringing them from 72% to about 80% of what they’re owed, a judge ruled.
U.S. Bankruptcy Judge Martin Glenn in New York today approved the distribution request of trustee James Giddens. The trustee has already distributed more than $4 billion, he testified today in a U.S. Senate hearing.
The judge approved the motion after Giddens withdrew a request to have customers sign a release before receiving the money that would bar them from suing third parties over their losses. The trustee has estimated there is a $1.6 billion gap between available funds and what customers say they are owed.
Giddens “did not provide any legal authority for requiring commodities customers to assign the customers’ claims against third parties” to the trustee, Glenn wrote in his opinion.
Under the proposed distribution, commodity customers who traded futures on foreign exchanges will get their first payments of about $50 million. About $600 million will go to customers who traded on U.S. exchanges. Holders of physical assets such as precious metals are in line to get about $35 million.
Glenn delayed ruling at an April 12 hearing after customers had objected, questioning the releases. A group calling itself the Commodities Customers also objected, saying the conditions could make them give up claims against third parties.
Legal Basis Lacking
The judge said during the hearing that if customers hand over their rights to sue parties to Giddens, it will result in “the most equitable distribution” of proceeds from lawsuits to all customers. At the same time, he questioned whether Giddens has the authority to demand those releases.
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).