This article originally appeared as a Reuters dispatch.
By Nick Brown
NEW YORK | Fri Jun 1, 2012 4:59pm EDT
(Reuters) – Former MF Global Holdings Ltd (MFGLQ.PK) customers are hoping to get fresh information on Monday about where their money went and for an update on efforts to get it back.
Trustee James Giddens, who is unwinding MF Global’s broker-dealer, is to provide a written report to the U.S. Bankruptcy Court in Manhattan on the status of his investigation into the company’s unraveling. He also is expected to give an update on his attempts to track down money that vanished from customer accounts as the company went under.
MF Global filed for Chapter 11 bankruptcy in October after its $6.3 billion bet on European debt alarmed investors and caused a liquidity crunch. The company, which was run by former New Jersey Governor Jon Corzine, revealed a large deficit in funds that were supposed to be segregated for commodities trader customers. Corzine, also a former CEO of Goldman Sachs Group Inc (GS.N), resigned days after the bankruptcy.
Giddens could also file as early as Monday a report on the legal fees amassed by his team working on the case. Their pay is certain to be scrutinized by MF customers who are anxious to get their money back.
Kent Jarrell, a spokesman for Giddens, declined to comment about specifics in the report but said updates on “all facets” of the trustee’s efforts are expected.
Louis Freeh, the trustee overseeing the wind-down of MF Global Holdings, the parent company of the broker-dealer, is also scheduled to submit a progress report on Monday. His report is expected to detail efforts to recoup money for the MF parent company to pay back its creditors. Freeh’s office referred calls on the report to MF Global Holdings spokeswoman Diana DeSocio, who declined to comment.
Both trustees had agreed to issue periodic status reports as part of their work on the case.
TRACKING CUSTOMER CASH
Giddens in February reported that the customer shortfall, estimated at $1.6 billion, was caused by MF Global’s improper use of customer cash to cover corporate transactions. At the time, Giddens said customer money traveled to myriad MF Global affiliates, counterparties, exchanges and other firms.
Congress has been frustrated at the lack of answers from both MF Global executives and regulators about why little is publicly known about the missing customer funds.
The Commodity Futures Trading Commission, the Securities and Exchange Commission, and the FBI have all launched probes into MF Global but no one has been charged with wrongdoing. On Friday, the CFTC filed a claim as a potential creditor of the broker-dealer so that it could pursue a restitution award if its probe results in an enforcement action.
U.S. Representative Randy Neugebauer is leading a separate congressional investigation and expects to issue a report this summer about its findings.
Giddens’ job is to recover as much as possible, including through litigation with parties who may have benefited from deals funded with client money. The trustee has indicated previously he may have claims against JPMorgan Chase & Co (JPM.N), a common counterparty in MF Global’s financial transactions. JPMorgan spokeswoman Mary Sedarat declined to comment Friday on potential litigation.
Giddens also has said he is mulling filing lawsuits against MF Global executives whose roles in the collapse may have constituted breaches of fiduciary duty.
Giddens is already tangled in litigation in the United Kingdom over about $700 million in the estate of MF’s UK affiliate. Giddens says the money belongs to U.S. customers.
Most MF Global customers already have received payouts of more than 72 percent of the value of their accounts and are waiting on the rest. It is unclear whether Giddens’ efforts will yield full recovery.
John Roe, co-founder of the Commodity Customer Coalition, a customer advocacy group, said he hopes the Giddens report addresses an estimated time frame for the return of additional funds. He also wants to see a list of counterparties that may become targets of clawback lawsuits.
Freeh and Giddens could be at odds over whether certain assets belong in the parent’s estate or in the hands of the broker-dealer — another topic the trustees would do well to address in their reports, Roe said.
“The sooner those disputes are resolved, the sooner we’ll have a realistic idea of what’s available for customers,” he said.
The brokerage liquidation is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.
(Reporting By Nick Brown; Additional reporting by David Henry and Jonathan Stempel in New York, and Karey Wutkowski in Washington; Editing by Martha Graybow, Kenneth Barry and David Gregorio)