Nearly two months after the Peregrine Financial Group (PFG) bankruptcy, Trustee Ira Bodenstein filed a motion Wednesday asking a judge to approve a distribution of funds to some of the defunct broker’s commodity customers.
In the filing, Bodenstein seeks permission to transfer up to $123 million to customers, out of the $181 million he has on hand. A $58 million reserve will be held back to cover possible variations in claim amounts. The money, according to the trustee, will be delivered in two waves, with the first distribution going to the roughly 12,600 customers with balances of $50,000 or less. Secondly, Bodenstein plans to make another distribution to customers with accounts containing more than $50,000, accounts with free credit balances of between $25,000 and $50,000 that had no trading activity within 90 days of the initial July 10 filing date, and related accounts.
Customers with 30.7 secured accounts stand to gain the most. Because more secured funds are reportedly available in their accounts, they will receive a distribution equal to about 40% of their account balances, while 4d and delivery customers will receive roughly 30%.
Excluded from the distributions are forex and over-the-counter metals clients, who, according to Bodenstein, are not considered “customers” under U.S. Bankruptcy Code and the Part 190 rules, because their claims do not involve commodity contracts. The filing notes only that those customer accounts “will be addressed separately as part of the case.”
As for the format of the distributions, the motion proposes a bidding process to determine which FCM would accept a bulk transfer of PFG business. In the event that no FCM makes an acceptable offer, Bodenstein plans to make the distributions by check or wire transfer.
The initial distribution is scheduled for on or before Sept. 28. Bodenstein then will make a “validity assessment” as to whether each second wave account should be included in the initial distribution. That decision will be made by Oct. 15. A hearing on the motion is scheduled for Sept. 12.