MF Global clients bash fat fees, seek quick wind-down

(Reuters) - The legal team winding down MF Global's bankruptcy estate, led by former FBI director Louis Freeh, has racked up nearly $25 million in estimated fees since its November 25 appointment.

Now a customer group is planning to ask that the case be streamlined so that Freeh and his team receive less and customers receive more.

On Friday, a coalition of former MF Global customers plans to argue in U.S. Bankruptcy Court in Manhattan that the Chapter 11 liquidation of the MF parent entity should be converted to a so-called Chapter 7, coalition leader James Koutoulas said on Wednesday.

In Chapter 11 cases, businesses or their court-appointed trustees try to restructure debt or sell assets to recover as much money as possible to pay off creditors, a process that can be drawn out. In Chapter 7, a trustee sells off assets as quickly as possible, with less involvement from professionals like lawyers, but sometimes at the expense of drawing top-shelf value.

Under bankruptcy law, administrative fees are paid ahead of other creditor claims, so Freeh's mounting bills are siphoning money from creditors, said Koutoulas, a Chicago fund manager who had $55 million tied up in MF Global on behalf of his clients.

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