MF Global reaches settlement with JPMorgan unit on recovery

MF Global Holdings Ltd. reached a settlement giving it a share of JPMorgan Chase & Co.’s recovery on a $60 million claim against the holding company’s brokerage.

Under a prior settlement with the brokerage, MF Global Inc., JPMorgan agreed to hand over $100 million in customer property and in return received the $60 million unsecured claim. As part of a new settlement, JPMorgan will give a percentage of its recovery on the claim to the holding company, according to court papers filed July 24.

Investigations of the bank “concluded that, while there are potential claims against JPMorgan, it is not at all clear” that plaintiffs would prevail in litigation seeking to recover money on the claims, lawyers for MF Global Holdings wrote in the filing in U.S. Bankruptcy Court in Manhattan.

The settlement avoids the delay and expense of lawsuits, and resolves disputes over transfers of customer property made during the final week before MF Global sought bankruptcy. If JPMorgan recovers less than $10 million on its claim, the holding company will get 10 percent, according to court papers. The percentage rises with the recovery amount, with each dollar over $50 million going to MF Global Holdings.

JPMorgan’s settlements with the brokerage have so far resulted in a total of $1 billion being made available to distribute to former customers, according to the filing.

Approval Hearing

A hearing to seek approval of the holding company settlement is set for Aug. 22. JPMorgan’s prior settlement with the brokerage already has court approval.

MF Global Holdings, once run by former New Jersey Governor and ex-Goldman Sachs Group Inc. Co-Chairman Jon Corzine, filed for bankruptcy in 2011 after a $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations. Most MF Global client funds were held in JPMorgan accounts, and the New York-based bank was a key lender to the parent before it collapsed in the eighth-largest U.S bankruptcy.

JPMorgan was agent for a $1.2 billion loan to MF Global Holdings before it failed and also loaned money to the brokerage and other affiliates, according to court documents.

The holding company’s Chapter 11 case is In re MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The broker liquidation is In re MF Global Inc., 11-bk-02790, same court. The class-action case is 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).

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