Story originally appeared in the November 23, 2011 edition of the Chicago Tribune.
Chicago-based group says it represents more than 7,000 MF Global customers whose money is temporarily frozen during bankruptcy proceedings.
By Gregory Karp, Chicago Tribune reporter
The newly formed Commodity Customer Coalition, based in Chicago, says it represents more than 7,000 MF Global customers whose money has been temporarily frozen while the brokerage firm goes through the eighth-largest bankruptcy in U.S. history.
John L. Roe, a principal at commodities futures broker BTR Trading Group Inc. in Chicago, is spokesman for the group, which wants to ensure customers get back all the money from their commodity trading accounts and get it back quickly, whether there is a shortfall or not. The shortfall could exceed $1.2 billion, according to bankruptcy trustee overseeing liquidation of the failed brokerage.
We asked him about the coalition.
Q: How did the group form?
A: The coalition grew out of a meeting with James L. Koutoulas, chief executive of commodity trading company Typhon Capital Management of Chicago, shortly after the announcement of MF Global’s bankruptcy on Oct. 31. We found each other through social media. We set up a conference call, and before we knew it, there were hundreds of people on it — just talking about the situation, how untenable it was and how there was really nobody representing customer interests. … Informally, we started talking about what we could do, what legal avenues we could pursue, to get before the court. But it was so cost-prohibitive that nobody wanted to do it. We’re talking about getting just one pleading before the (bankruptcy) court costing $25,000 or $50,000.
Koutoulas, who is also an attorney, tapped his legal connections, including ones with Northwestern University Law School and was able to cobble together some attorneys who would work on a pro bono basis.
Q: What is its purpose?
A: The goal is 100 percent return of customer funds. Going forward, the group has the goal of shoring up confidence in the industry. … We believe there needs to be serious regulatory reform to prevent this type of thing from happening in the future.
Q: Who is behind the coalition?
A: We have everyone from farmers and ranchers involved in this to pensioners to brokers, who are people like me who have all kinds of retail and institutional customers. It could be small (mutual) funds, individual traders. It’s people who invested their retirement savings. … It really runs the gamut of what it is to be a commodities trader.
Q: How significant is the coalition?
A: We know that we represent over 7,000 customer accounts. … I would venture to guess that (in dollars) it’s worth north of $100 million.
Q: Why is the group based in Chicago?
A: This is the center of the futures industry. Everything is here … and there are thousands of people who have been affected by it right here.
Q: What do you want?
A: We think the claims process (to get money back) the trustee has proposed is slow, arduous and capricious. It doesn’t take into account the expertise in the industry that we have to move things along faster. So we want an expedited claims process. And if there is a shortfall — however much money that is, it doesn’t matter — we want to have a super-priority lien for all MF Global customers over the assets of MF Global’s estate. To say, “MF Global used your money for something else and you have to share in the loss,” that’s ridiculous. If that happens, it will destroy commodities futures trading in this country. The assets of the estate must be sold to make customers whole. Right now the trustee is saying there is $1.2 billion unaccounted for. Well, it doesn’t matter. There’s $41 billion in assets in the estate. Give us our money.
Q: Why should the public care about the bankruptcy of MF Global?
A: You’re going to start seeing this hit the economy, and that’s going to damage the fragile economic recovery. The players involved with this think it’s not that big of a deal because the taxpayers aren’t really on the hook, and it’s not as big as Lehman (Brothers bankruptcy). What they don’t understand is that it is just as systemically important as Lehman because it reaches all these different commodities — because you’ve frozen up so many different peoples’ ability to hedge price risk. … And the general public should be extremely concerned that there can be $1.2 billion — not of the company’s money but of customer money — missing for three weeks and not a single arrest has been made.
Commodity Customer Coalition online: commoditycustomercoalition.org
For more information on MF Global’s liquidation: