March 25, 2023

DealBook: MF Global Trustee Says Claims May Exceed $3 Billion

Louis J. Freeh, bankruptcy trustee for MF Global.Andrew Harrer/Bloomberg NewsLouis J. Freeh, bankruptcy trustee for MF Global.

The trustee overseeing the bankruptcy of MF Global estimates that creditors, including banks, big investors and service providers, could have more than $3 billion in claims against the failed company.

In his latest report to the bankruptcy court, the trustee, Louis J. Freeh, outlined his investigation of MF Global, which collapsed in October after misusing customer money.

In the 119-page document, Mr. Freeh, a former director of the Federal Bureau of Investigation, details that 112 claims could eventually be filed. While most of the claims are likely to occur in the United States, nearly $1 billion of them could stem from the operations in Britain, where MF Global had one of its largest units.

Related Links

“This report gets to the heart of the complex intercompany relationships inherent in a global firm that provided financing for its affiliates and subsidiaries all over the world,” Mr. Freeh said in a statement. “We believe this report provides increased transparency as to how the firm’s capital flowed through these entities and why we believe the Chapter 11 debtors have potential claims against affiliates in excess of $3 billion.”

The report came just hours after James W. Giddens, the trustee in charge of returning money to customers, laid out his own assessment of the bankruptcy in a 275-page report. Mr. Giddens also said he was considering potential civil claims against MF Global’s top executives, including the former chief executive, Jon S. Corzine.

The two trustees are feuding over a limited pool of money that remains available to MF Global. Their missions are at odds. Mr. Freeh must return money to creditors, while Mr. Giddens is responsible for making customers whole. Farmers, ranchers and hedge funds are still missing a third of their money, as Mr. Giddens tries to recover more than $1 billion of customers assets.

In his report, Mr. Freeh took a swipe at Mr. Giddens. While Mr. Freeh expressed optimism that MF Global customers would receive all of their money, he indicated that clients might not be at the head of the creditor’s line should there be a shortfall in customer money.

In the report issued by Mr. Giddens on Monday, the trustee said that Mr. Freeh’s potential claims against MF Global’s brokerage unit would not “appear to have any priority over customer claims.”

Article source: