CCC steps in
John Roe, co-founder of the CCC, says, “We had a long chat [with an attorney for the trustee] and he said ‘we are probably going to start to make distributions by June 2012’ and that is when this whole thing started for us and caused enough noise and got enough people whipped up.”
Customers who thought their funds were segregated and safe were indeed upset and the CCC, which unsuccessfully attempted to be named to the creditors’ committee to represent customer interest, did manage to get a seat at the table and urged the trustee to make more timely distributions.
Customers who had all their money in cash got nothing and were angry. The trustee, realizing this was a new ball game, pledged to make several interim bulk distributions. The first would go to those customers all in cash and CME Group initially pledged $300 million, later bumped up to $550 million, to help expedite those distributions. On Nov. 17, MF Global Bankruptcy Judge Martin Glenn approved the bulk transfer of approximately $520 million to those 23,300 customer accounts all in cash.
While a large step, it also angered many customers with large accounts that had minimal positions. Jason Skole fully funded a commodity trading advisor investment to the tune of $200,000 and had only a few grain positions on. He received 4% of his money when his positions transferred and nothing in the cash account bulk distribution. Lee Lowell had one cotton call with a value of $5 that was about to expire worthless in a $19,000 account; he would receive nothing.
Pressure was mounting from the CCC, who wanted all available money released, and Giddens pledged another bulk distribution that would true up all futures customers to 60%. However, as he was making this announcement, he also revealed that the shortfall was much larger than the reported $633 million — $1.2 billion or more. Despite this he later was able to expand this distribution so that customers who had segregated accounts (known as 4d) would receive 72% of their money.
Roe says, “We can’t take all the credit for this, but we were part of a process that helped move that needle from starting to make distributions in June 2012 to 72% for 4d [U.S. seg funds] by Christmas.”
But there was an added complication as shortly after Giddens announced the third bulk distribution, a trustee for MF Global Holdings, Louis Freeh, was appointed who would challenge this distribution as well assumptions of customer priority.
This would end the relatively speedy recovery of customer money and enter the more formal claims process.