This article originally appeared on Medill Reports.
The head of the Commodity Customer Coalition, a Chicago-based non-profit that represents former customers of MF Global Inc., expressed confidence in an interview Thursday that the outcome of the group’s latest effort to recover customer funds will be successful.
The advocacy group on Monday filed a brief in Bankruptcy Court in New York arguing that all customers are entitled to their money – regardless of where it went – following the brokerage firm’s October collapse.
“We are optimistic, we think we are right on the law. I think we’ve looked at it every which way and it is implicit in the law. We think the judge will set a precedent.” said CCC co-founder John Roe, adding that if the court denies the order he plans to take his case to Capitol Hill. “We will pressure Congress to stay on top of the Department of Justice to make sure the investigation is going forward the way it should.”
MF Global filed for bankruptcy protection last year after disclosing risky purchases of European debt. After the filing, customer money could not be accounted for, which caused regulators to investigate whether the firm misused customer funds.
Only 72 percent of customer funds have been distributed. At a presentation to former customers in New York on Thursday, James Giddens, the Trustee appointed to oversee the company’s liquidation, said MF Global has distributed approximately $3.8 billion so far and has an additional $1.5 billion under its control. Giddens stated last month that as much as $1.2 billion or more of customer funds is missing.
“Everything in the presentation was pretty well known ahead of time,” said Roe, who is a principal at BTR Trading Group in Chicago. “Confidence has been shaken, customers want to see action. They don’t want to see regulators just propose new regulations. They want to make sure this doesn’t happen again.”
While Roe and other customers blame regulators for their failure to catch MF Global’s misuse of customer funds, others point fingers at Jon S. Corzine, the CEO of MF Global at the time of its collapse. Corzine has not been officially accused of any illegal activity.
“While it is clear that action is necessary to restore customer confidence and protect against future failures, the fact is,” said Terrence A. Duffy, CEO of CME Group Inc., in his December testimony before the U.S. House Committee on Financial Services, that MF Global, “broke rules by moving customer segregated funds out of an account over which it had control.”
Investigations like MF Global can take a long time and it’s important to employ patience throughout the process, according to David Ruder, professor at Northwestern University School of Law and former chairman of the U.S. Securities and Exchange Commission.
“The regulatory process necessarily involves extreme confidence during the period the process is underway. You do not want to unnecessary indicate something when you don’t have all the facts,” said Ruder. “It is extremely unusual, if not the only time in history that a commodity entity this size to be in a situation involving customer funds.”
Former MF Global commodity futures and securities customers have until Jan. 31 to file claims with the Trustee, and all other claims must be received by June 2.