David Goldman for The New York TimesJon S. Corzine on the trading floor of MF Global last year.
12:55 p.m. | Updated
The court-appointed trustee overseeing the liquidation of MF Global’s brokerage now estimates that the shortfall in the firm’s customer funds could be more than $1.2 billion, double previous estimates.
Regulators currently suspect that MF Global improperly used customer money for its own purposes in the days before filing for Chapter 11 protection, according to people briefed on the matter.
The decision to release the updated figure on Monday came after authorities concluded that much of the customer money had left the firm, these people said.
By MF Global’s estimates to regulators, roughly $600 million in customer money was missing. But as forensic accountants pored over MF Global’s books in recent weeks, they began to question those estimates.
By Sunday, the accountants from Deloitte and Ernst Young had discovered an even larger gap in customer funds.
The trustee, James W. Giddens, held a four-hour conference call on Sunday evening with staffers in New York City and Chicago before deciding to publicly reveal the new number, according to a spokesman, Kent Jarrell. Officials from the Commodity Futures Trading Commission and the CME Group, MF Global’s primary exchange, were consulted on Sunday night.
It is unclear what is behind MF Global’s prior, substantially lower estimates. The matter is being investigated by Mr. Giddens and a collection of federal authorities, including the Justice Department.
Authorities are still searching for the money, and are considering two possibilities. One is that MF Global used the money to meet trading partners’ demands for extra cash, which could come back. The other is that it was used to cover trading losses, which would be unrecoverable.
A spokeswoman for MF Global declined to comment.
Separately, Mr. Giddens’s office said it had already distributed about $1.5 billion in customer funds meant to support trading positions, and that $520 million in additional cash would soon be paid out.
The trustee’s office still controls about $1.6 billion in customer funds, most of which could be distributed early next month.
Beyond the shortfall in customer accounts, Mr. Giddens’s office said it did not have access to money that was held in foreign subsidiaries of MF Global, which are under the control of bankruptcy trustees in those countries.
“While the trustee will pursue them vigorously, it has been his experience that recovery of these foreign assets may take more time,” the office said.
Article source: http://feeds.nytimes.com/click.phdo?i=370c341008c53970d31dd74434373d65
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