Going to Bat for MF Global Clients | Progressive Farmer

    Story originally appeared on dtn’s Progressive Farmer 

    By Katie Micik
    DTN Markets Editor

    The Commodity Customer Coalition, a group that informally represents more than 2,500 customers of the bankrupt commodities and securities brokerage firm MF Global, will argue in court next week, supporting customers’ requests for immediate release of at least 85% of the cash holdings in their accounts.

    John Roe of BTR Trading Group in Chicago and James Koutoulas, an attorney at Typhon Capital Management are going to bat for account holders. Last week, Case 11-2790 (MG) SIPA was filed in the U.S. Bankruptcy Court, Southern District of New York (where the MF Global bankruptcy is taking place). It proposes that several customers be allowed to withdraw or transfer 85% of the cash holdings in their segregated accounts. The Coalition is marshalling support for the case, and Koutoulas with testify at the hearing on November 22. If the judge agrees, it could grease the skids for release of other clients’ funds as well.

    The concern, according to Koutoulas, is that “the trustee intends to treat the segregated commodity account funds through the same claims process common to securities assets in bankruptcy. If that happens, the process will take months, perhaps years.” In addition, the trustee has been quoted in the press as saying that customers of MF Global may have to share in the loss of segregated funds pro-rata with other creditors. “If MF Global comingled segregated funds with corporate assets, it was a criminal act,” said Koutoulas. So by lumping customers with collateral in segregated funds in with business creditors, it would be making those creditors beneficiaries of the criminal act, he said. “Paying J.P. Morgan with an Iowa farmer’s money is not only morally and legally wrong, it risks the future of the American economic model. Who would want to hold a commodities account in the U.S. ever again?”

    That would have chilling effects on the U.S. economy, he told DTN, “if hundreds, if not thousands, of farmers and other pure commodity users go bankrupt because they can’t access their funds. The same goes for the brokers who don’t get their commission checks that were due for October. But, the real chill will come if it becomes clear to non-MF Global futures customers that their money isn’t safe anywhere and they decide to stop trading. That’s when volumes will really plummet, and it’s not as far off as one may think.”

    The Commodity Customer Coalition urges the following short-term action from Congress, Roe added:

    – Order the trustee to immediately release the 88.4% of client assets that were not missing from MF Global’s accounts.

    – Assign a representative for clients to the creditor’s committee to ensure they have an advocate alongside major creditors like J.P. Morgan and Bank of America.

    – Demand the CME set up a temporary fund to cover the missing $633 million so clients can be paid out, then take over on clients’ behalves in bankruptcy court and/or assess a special fee to all trades executed on the CME to repay the fund.

    – Structure the trustee’s fees so that they do not affect availability of client segregated funds but, rather, come out of general business assets.

    The Commodity Customer Coalition web site is under construction but in the meantime, see http://www.btrtrading.com/… for more information on CCC, MF Global and links to related sites.