Bloomberg News

MF Global Cash at JPMorgan Presumed Its Own, Freeh Says

December 13, 2011

(Updates with trustee’s filing in seventh paragraph.)

Dec. 12 (Bloomberg) -- MF Global Holdings Ltd.’s $25.3 million in cash held at JPMorgan Chase & Co. is presumed to be its own, the bankrupt company’s Chapter 11 trustee said in response to customer objections to its bid to use the money.

MF Global Holdings should be allowed to use the cash collateral of JPMorgan, trustee Louis J. Freeh said in papers filed today in U.S. Bankruptcy Court in Manhattan. Customers of the company’s failed brokerage, MF Global Inc., had asserted that the money may have been part of the $1.2 billion believed to be missing from their segregated accounts.

“The customers have failed to provide this court with any actual evidence in support of their position,” Freeh said in court papers. MF Global Holdings owns the New York-based bank account with JPMorgan, and under New York law, it is presumed that funds deposited in an account belong to the account holder, the trustee said.

MF Global Holdings, once run by former New Jersey Governor and ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed the eighth-largest U.S. bankruptcy after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most indebted nations. About $1.2 billion may be missing from segregated customer accounts, according to James Giddens, the trustee liquidating the MF Global brokerage.

Cash Talks

The company has been in talks with JPMorgan, its largest lender, on the use of cash collateral to pay the costs of its bankruptcy, a lawyer for Freeh said last week. U.S. Bankruptcy Judge Martin Glenn said Dec. 9 that he would reconsider the use of cash at a hearing Dec. 14 after customers objected.

JPMorgan, agent to a $1.2 billion loan, agreed at the outset of MF Global Holdings’ bankruptcy to let it use $26 million, subject to an agreement that gives the bank a lien on all of the company’s assets.

In a separate court filing today, attorneys for Giddens said that the trustee’s law firm had ended its one “insignificant” active representation of JPMorgan and prior work for the bank in the bankruptcy case of Lehman Brothers Holdings Inc. was unrelated to the debtor and wouldn’t constitute “representations of interests adverse to the estate.”

PricewaterhouseCoopers LLP is a current client and auditor of Giddens’s law firm, and the relationships are such that the firm “will not be adverse to” the accounting company, the attorneys said. Two of the ten secured credit facility lenders are or may become current clients of Giddens’s firm, they said.

$300 Million Loan

It isn’t yet known whether JPMorgan or PricewaterhouseCoopers are creditors of MF Global Inc., Giddens’s lawyers said. It’s believed that lenders under a $300 million loan to MF Global’s parent, for which JPMorgan was agent, were fully secured, the lawyers said. Giddens’s firm can sue JPMorgan if a potential dispute arises; any legal action against PricewaterhouseCoopers would be handled by a “conflicts counsel,” they said.

Lawyers for Giddens are seeking a determination by a judge that Giddens can handle the case disinterestedly.

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, 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).

--Editors: John Pickering, Stephen Farr

To contact the reporter on this story: Tiffany Kary in New York at

To contact the editor responsible for this story: John Pickering at

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