This article originally appeared in the April 5, 2013 edition of Financial Times. To view the original, click here.
By Tom Braithwaite in New York and Neil Munshi in Chicago
A judge approved the liquidation plan of MF Global, cementing the eighth-largest US bankruptcy and paving the way for the collapsed brokerage’s assets to be distributed to creditors.
The ruling in a New York court came a day after the bankruptcy’s trustee found Jon Corzine, the former chief executive, had contributed to the 2011 collapse with a risky trading strategy and inadequate controls.
Debt-fuelled bets on European government debt, coupled with credit ratings downgrades and a troubled global economy precipitated MF Global’s failure in October 2011.
A fire sale of the company was scuttled when would-be acquirers discovered missing customer funds that at one point amounted to more than $1bn.
But Louis Freeh, the court-appointed trustee, said after the ruling: “I do firmly believe that the customers in the case will be made whole, as a result of a lot of good work.”
A separate trustee, who is overseeing the wind-down of the brokerage unit, has estimated the recovery by customers at at least 93 cents on the dollar.
Judge Martin Glenn overruled other objections, noting that creditors had “overwhelmingly” supported the plan, and approved the liquidation on Friday. MF Global had assets of $41bn.
John Roe, manager of BTR Trading Group, a Chicago-based futures firm, who heads a group advocating for former MF Global customers, said the court approval did not restore customer confidence destroyed by the brokerage’s collapse.
“The problems that are underlying here are still there,” he said.
Mr Roe, whose customers had around $20m with MF Global, has been an outspoken critic of Mr Corzine, and has pushed for him and other executives to be held legally accountable for MF’s bankruptcy.
James Koutoulas, who heads Typhon, a second Chicago-based futures firm, said he was pleased that his customers, who had $55m with MF Global, would be getting their money back. But he added of the trustee’s report’s conclusions about the company’s management: “quite frankly I don’t think [Mr] Freeh went far enough”.
A spokesman for Mr Corzine on Thursday disputed the report’s conclusions. He said: “There simply is no basis for the suggestion that Mr Corzine breached his fiduciary duties or was negligent.”