James Giddens, the US liquidation trustee for bankrupt futures broker MF Global, is in dispute with KPMG, the administrators of MF Global UK, over the classification under UK law of US$600 to US$700 million in US commodities claimant funds purportedly held as segregated assets for US customers dealing in foreign futures.
Two weeks ago, KPMG said it had so far recovered £594 million (US $916 million) of client monies held by clearing houses, exchanges and brokers, representing 82% of known non-US segregated funds. However, Giddens believes much of these monies were segregated for US customers who traded on foreign exchanges and should be returned to US customers.
“I am disappointed in the UK administrators’ position,” Giddens said. “While we have made significant progress in identifying and distributing customer property held by US depositories, the UK administrators’ position will significantly affect, in the near term, my ability to return a substantial amount to US customers dealing in foreign futures.
We will actively and expeditiously pursue the resolution of this issue.”
Giddens has no control of most assets associated with foreign positions but he believes much of the funds belong to US customers of MF Global who traded on foreign exchanges.
The investigation into an apparent shortfall of segregated customer property is continuing and the customer property held by MF Global UK does not change Gidden’s estimate that the shortfall is not less than US$1.2 billion.
“We have worked closely with MF Global management and staff and the exchanges and clearing houses to allow the huge number of client positions to be transferred to other brokers or closed in an orderly manner, in accordance with the relevant rules,” said KPMG’s Richard Heis, joint special administrator, at the time of KPMG’s pre-Christmas update on its search for missing segregated funds. “We are pleased with progress in the collection of both client and company monies, and are working hard to prepare to make an interim distribution of client money as soon as reasonably practicable.”
MF Global filed for bankruptcy in New York on 31 October after counterparties reacted adversely to the disclosure of a US$6.3 billion bet on European debt. The unwinding of client positions is being further complicated by the varied liquidation policies of futures clearing houses in Europe and the US. It has also been reported widely that regulators have determined that days before the 31 October bankruptcy filing, MF Global may have moved more than US$100 million in client money to its own brokerage accounts.
A spokesperson for KPMG today said the company declined to comment on Gidden’s position.