MF Global customers recover $8.1B from brokerage’s failure

February 11 22:59 2016

Former securities and commodities customers of MF Global have recovered $8.1 billion — virtually all of their assets — with Tuesday’s conclusion of the bankruptcy court liquidation of the failed brokerage formerly headed by Jon Corzine. Judge Martin Glenn approved one of the final remaining chapters that followed MF Global’s Oct. 2011 collapse amid a $1.6 billion shortfall in customer accounts.

The Securities Investor Protection Corporation, a federally-mandated company that works to return cash, stock and other securities to brokerage customers, said the $8.1 billion in distributions includes:

$6.9 billion to cover 100% of allowed claims by MF Global customers.

$35 million for 100% of allowed claims by administrative and priority general claimants whose claims were secured.

$219 million to cover 95% of unsecured general claimants.

“The end of the MF Global liquidation demonstrates that the law designed to protect customers of failed brokerages works, and works well,” said SIPC President Stephen Harbeck.

The outcome “was unimaginable when the proceeding began,” said bankruptcy trustee James Giddens. MF Global’s implosion resulted in part from approximately $6 billion in ill-timed investments on debt of Ireland, Italy, Portugal, Spain and other European nations. The investments were part of a strategy in which Corzine — a former U.S. senator, New Jersey governor and Goldman Sachs chief executive — planned to transform the brokerage into an investment bank.

However, margin calls and credit downgrades by rating agencies beset the brokerage in 2011. MF Global officials tapped more than $1.6 billion in customer funds that were supposed to be held in secure accounts, and used the money to cover liquidity shortfalls in a failed attempt to head off the bankruptcy filing. MF Global’s parent company helped free money to fund the customer repayments by agreeing to give up rights to its $1.16 billion unsecured claim against the brokerage.

  Categories: