At long last, customers of MF Global Inc. (MFGI) will be made whole as James W. Giddens, Securities Investor Protection Corporation (SIPC) trustee for the liquidation of MFGI, announced today the final distribution bringing customers to 100%, “fully satisfying all claims.”
With this distribution that begins on April 4, a total of $6.7 billion will have been returned to over 26,000 mainly commodities futures customers. The distributions are expected to take several weeks.
James Koutoulas, co-founder of the Commodity Customer Coalition (CCC), says, “While MF Global was one of the most catastrophic events in the history of the futures industry, I'm elated that after two-and-a-half years customers are finally going to be made whole.”
The CCC was founded by Koutoulas and John Roe principal of BTR Trading (both customers of MF Global) shortly after MF Global declared bankruptcy when it became apparent that there was a lack of urgency in the way the SIPC trustee, who was largely unfamiliar with Futures industry regulation, approached the task of getting former MF Global customers their money back.
Initially, the trustee had set-up what would have been a lengthy claims process that would have taken several month for customers to get significant portions of their money back after securing a return of 60% of customer funds that were held at the CME clearinghouse.
The CCC protested and helped to expedite more frequent distributions.
Futures first spoke to Koutoulas, CEO of Typhon Capital Management, a few days after the bankruptcy filing when he claimed to represent approximately 200 former MFGI customers. His goal was, “To give a voice to the thousands of customers who don’t have a seat at the table,” and he sought to be appointed to the MF Global Bankruptcy Creditors’ Committee. He did not get that appointment but when the soon to be created CCC grew from 200 to more than 5,000 in a matter of weeks and eventually 38,000, bankruptcy Judge Martin Glenn took notice and ordered the trustee to work with Koutoulas and the CCC.
While happy that customers will be made whole Koutoulas adds, “It saddens me that (Former MF Global Chairman and CEO) Corzine remains a free man and that 38,000 people were left with only a small team of inexperienced but passionate volunteers to help.”
Commodity Trading Advisor Stanley Haar, a prominent member of the CCC who actively lobbied members of Congress on behalf of former MFGI customers is also less than satisfied. “While of course pleased with this news, I feel that the term "100%" is disingenuous,” Haar says. “Two and a half years have elapsed since our deposits were looted from supposedly "segregated" custodial bank accounts, and the simple return of those funds will not offset the significant losses incurred in the interim by customers, businesses and employees who were affected by this travesty, not to mention the lingering reputational damage to the futures industry.”
The CCC has also advocated for criminal prosecution and reforms to the bankruptcy code, which is somewhat uncertain in this regard and did not serve to protect futures customers as is delineated in the Commodity Exchange Act. "I'm pleased that we can put this phase of the MF Global saga behind us. Now we can focus on two things: bringing guilty parties to justice and making sure that customer property is harder to ensnare in costly bankruptcy proceedings," Roe says. "The way to do that is to require FCMs to subordinate their debt to customer property and codify the legal authority for the CFTC to define customer property in the Commodity Exchange Act."
Haar says, “I take some satisfaction from having participated, together with colleagues and competitors, in the effort to set the record straight about the misappropriation of our funds and force a recovery, but continue to be appalled by the fact that we needed to undertake this grassroots effort in the first place. Where were the government and industry regulators whose job it is to protect the public and to maintain the integrity of our financial markets? Where is the Department of Justice, and why has no one been held accountable for what occurred?”
Roe still holds out hope for a criminal prosecution. "I'm hopeful after the recent conviction of Sentinel's CEO, that the Justice Department will consider prosecuting the clear violations of the Commodity Exchange Act which happened at MF Global."
Koutoulas adds, “I hope this result shows people that the most corrupt organizations can be defeated by people who stand up for what's right.”