MF Global Holdings, Ltd. (fka MFGLQ)

[TheProfit]

2ND UPDATE: MF Global Trustee Found 'Suspicious' Transfers Pre-Collapse

Dec 9, 2011 17:57:41 (ET)

--Trustee will hold back $1 billion as it continues to investigate shortfall.

--No plans to distribute the additional $1 billion any time soon

--Exact shortfall won't be known until claims are filed and sorted

(Adds no further comment by spokesman about suspicious transfers or trades in fourth paragraph.)


By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW

NEW YORK (Dow Jones)--The trustee liquidating the brokerage of MF Global Holdings Ltd. (MFGLQ) has uncovered "suspicious" transfers made from customer accounts in the days before the company collapsed in late October, a lawyer said Friday morning.

A lawyer for James W. Giddens, the trustee, was answering a judge's question about whether an investigation into MF Global had shown suspicious transfers from the so-called "segregated accounts" that still appear to have a significant shortfall.

The lawyer said he couldn't give more details about the trades, as they're part of several federal investigations.

In an interview with reporters after the hearing, trustee spokesman Kent Jarrell said he couldn't elaborate on the suspicious transfers or trades that may have been flagged.

In court, Giddens's lawyer didn't budge from a prior estimate of how much customer money could be missing from the customer accounts at MF Global, which collapsed into bankruptcy in late October and immediately came under scrutiny for possibly squandering customer money.

"We cannot say that the deficit is necessarily any less than $1.2 billion," said the lawyer, Hughes Hubbard & Reed LLP's James B. Kobak Jr.

Kobak added that the exact shortfall won't be known until all customer claims are filed and sorted out. Kobak said the trustee's office is "not in a position to decide whether criminal activity" was involved.

Kobak told Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan that a third transfer of customer accounts to third parties which Glenn approved on Friday, would mean that about 72% of the money in customer accounts will be available to them soon. The trustee will hold back about $1 billion as it continues its investigation, Kobak said, adding that the office would wait a while before determining whether to transfer more.

Judge Glenn said the $1 billion number, which some parties said is too high, was the right number for the reserve.

Giddens's office has already transferred about $2 billion worth of customer accounts to new firms, and the third transfer would cover about $2.1 billion more. Most of that $2.1 billion would be transferred in a matter of days, Kobak said.

The new transfer will "true-up" the accounts of all former customers of the collapsed broker-dealer, according to a spokesman for the trustee, after a series of fund transfers last month left some complaining of unfair treatment.

MF Global Holdings, the parent company, filed for Chapter 11 bankruptcy protection on Oct. 31, while its main operating arm, the brokerage, was designated to be unwound by Giddens in accordance with the Securities Investor Protection Act.

The trustee said he is working with an investigative team consisting of lawyers and forensic accountants from Deloitte and Ernst & Young, as well as with The Department of Justice, regulators and exchange operator CME Group Inc. (CME).

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152; [e-mail]

--Jacob Bunge and Dan Strumpf contributed to this article.

(END) Dow Jones Newswires

December 09, 2011 17:49 ET (22:49 GMT)