Adding to the complexity was the structure in which MF Global Holdings Ltd. (Holdings) filed Chapter 11 and MF Global Inc. (Brokerage) was placed in a Securities Investor Protection Corp. (SIPC) liquidation with James Giddens appointed as trustee.
Many interested industry parties have argued that this is where the entire mess broke down because MF Global had operated as one entity and should not have been allowed to be separated (see “MF Global’s original sin,” page 26). Attorneys for Sapere Wealth Management had filed a suit with the bankruptcy court to force Holdings and the brokerage into one Chapter 7 liquidation with Commodity Exchange Act futures customer priority rules unequivocally enforced. The Commodity Customer Coalition (CCC) also had argued for this. Alas, Sapere was defeated and the CCC did not pursue further legal action in this regard.
On Nov. 2, CME Group further defined the shortfall as $633 million or 11.6% of MF Global segregated funds. Giddens, with the help of CME Group, moved to transfer positions and margin money held at CME Clearing to futures commission merchants. This began immediately after his appointment, and within a week approximately 14,500 accounts were transferred along with $1.55 billion in margin, representing 60% of the customer margin held by the CME Group clearinghouse (see “Customer money ebbs back,” below).