(Updates with clawbacks in second paragraph.)
Nov. 17 (Bloomberg) -- The trustee liquidating broker- dealer MF Global Inc. will use “whatever legal means are available” to maximize the assets of the estate, his spokesman said.
The spokesman, Kent Jarrell, made the comment today when asked whether trustee James Giddens might consider “clawing back” money customers took from their accounts before MF Global’s bankruptcy. Under bankruptcy law, a trustee can sue to try to recoup money taken from a business before it failed.
Thousands of Bernard Madoff’s former clients are fighting clawback suits brought by the trustee liquidating his firm. While Giddens got permission today to return $520 million of collateral to MF Global commodity customers, his job as trustee is “to maximize assets,” Jarrell said in an e-mail.
“Any funds that were withdrawn from MFG accounts in the run-up to the collapse, either because of suspicions the customer may have had, or from purely organic day-to-day withdrawals, the bankruptcy trustee could initiate action to claw back those funds,” Ann Barnhardt, a commodity hedge broker, said on her website today. “This makes my blood run cold.”
The Madoff trustee sued the New York Mets owners demanding withdrawals made as long as six years before the bankruptcy, before a judge restricted him to a two-year window. The Mets owners are fighting the remaining demands.
Quitting the Business
Barnhardt, who runs Barnhardt Capital Management Inc. in Lone Tree, Colorado, had no accounts at MF Global, she said in a phone interview. She quit the commodity business today, citing MF Global’s impact.
“Liquidity is drying up and people are leaving the market,” she said in the interview. “I could no longer tell my clients their positions are safe.” Barnhardt said she specialized in hedging exposure in livestock and grain for clients.
U.S. Bankruptcy Judge Martin Glenn today approved Giddens’s request to return money to MF Global clients. The distributions may begin within a week, Jarrell said.
About 23,300 customers with only cash in MF Global accounts on Oct. 31 will get 60 percent of the $869 million that was held back. The “true number” of commodities clients is about 38,000, the trustee has said. An earlier distribution released almost $1.6 billion in collateral.
Giddens said yesterday that he aims to make “one or more additional interim distributions” of collateral, beyond the $520 million, while handling claims from customers.
Investigators are seeking about $600 million of funds apparently missing from customers’ accounts.
MF Global Holdings Ltd., the parent company which was run by former Goldman Sachs Group Inc. co-chief executive officer Jon Corzine, filed for bankruptcy after making bets on sovereign debt and getting margin calls. The New York-based company listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed Oct. 31 in Manhattan. The broker-dealer is being liquidated separately.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-cv-7750, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--With assistance from Tiffany Kary in New York. Editors: Andrew Dunn, Michael Hytha
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