MF Global Inc. trustee sees $1.6 billion gap

February 9, 2012 06:00 PM

The Trustee, relying on the books and records of MF Global Inc., the investigation that has traced a majority of the cash transactions during the last week before the bankruptcy of MF Global Inc., and the claims process, currently believes there is at least a $1.6 billion gap between the value of the Trustee’s estimate of potentially allowable commodities claims and the assets that are currently under the Trustee’s control. This reconfigured estimate is expected to change over time as claims are processed and assets recovered, and depending on claims reconciliation and the ultimate outcome of claims the Trustee may contest, the estimated deficiency may rise or fall in significant amounts. The estimate applies to claims from commodities customers who traded on US exchanges, as well as commodities customers who traded on foreign exchanges, including approximately $700 million that the Trustee is disputing with the Joint Special Administrators of MF Global UK Limited.

The Trustee has returned approximately $3.9 billion in property from US depositories to former commodities customers in three bulk transfers since MF Global went into bankruptcy on October 31, 2011. Currently, the Trustee has approximately $1.4 billion in assets under his control, which is being held in reserve.

The Trustee and his staff continue to review and tabulate claims made by former MF Global Inc. commodities customers against the MF Global Inc. estate, which were submitted prior to the January 31, 2012 claims deadline.

Early estimates of the analysis of commodities claims show approximately 40% of the US commodity claims came from five states: California, Florida, Illinois, New York and Texas. Approximately 91% of all commodities claims seek less than $100,000, taking into account the previous return of 72% of the US segregated customer property to former retail customers with US futures positions.

Claims will be verified for accuracy and duplicate claims will be identified. Determination letters are being issued to former customers on a rolling basis. The determination letter will acknowledge receipt of the claim and provide information on whether the claim has been allowed, denied, reclassified or requires further reconciliation or information.

The Trustee is eager to make additional distributions to former MF Global Inc. customers as soon as possible. However, the Trustee is required by law to hold an appropriate reserve of funds until disputed claims are resolved either through negotiation or by the Court. At this time, the Trustee anticipates significant disputed claims against the MF Global Inc. estate by MF Global Holdings Ltd., MF Global UK Limited, and other entities. The Trustee will move to attempt to resolve these claims as quickly as possible, but it is uncertain how long resolution will take. Therefore, it is not known at this time when the Trustee will be legally able to make additional distributions.

While securities customers seeking to receive maximum protection under the Securities Investor Protection Act were asked to file claims by January 31, the claim registration period for securities customers does not close until June 2, 2012. The gap between securities claims values and assets under the Trustee’s control cannot be accurately estimated at this time.
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