MF Global Holdings Ltd. settled a U.S. government lawsuit, agreeing to pay $1.2 billion in restitution and a $100 million fine for customer losses tied to the company’s 2011 collapse.
The U.S. Commodity Futures Trading Commission sued MF Global and company officials including former Chief Executive Officer Jon Corzine last year for failing to properly supervise employees as the firm spiraled toward bankruptcy. U.S. District Judge Victor Marrero in Manhattan signed an order yesterday approving the pact.
Customers have already received most of what they are owed, according to the CFTC, the main regulator of MF Global’s failed brokerage unit, MF Global Inc. The agency claimed MF Global Holdings is responsible for the brokerage’s failure to notify the agency of deficiencies in customer accounts, false statements and improper investments.
The day the lawsuit was announced, the agency said it had a settlement with the brokerage unit, MF Global Inc., to pay about $1 billion in restitution to clients and the $100 million penalty. Yesterday’s accord helps guarantee payment of the brokerage unit’s obligations. The regulator said it will continue its litigation against Corzine and Edith O’Brien, a former assistant treasurer of the unit that oversaw the funds.
A bankruptcy trustee had already collected much of the money from settlements with parties including JPMorgan Chase & Co., which was a key lender to the company before it collapsed and held most of MF Global client’s funds. A series of agreements with the bank freed up $1 billion for distributions to former customers.
The trustee, James W. Giddens, has returned $6.7 billion to satisfy the allowed claims of 26,000 former customers of MF Global Inc., Kent Jarrell, a spokesman for Giddens, said in a statement today. Giddens has also distributed $551 million to the firm’s general creditors.
“This is one more confirmation of the conclusion of the trustee’s investigation that showed management’s actions, along with the lack of sufficient monitoring and systems, resulted in customer property being used during the liquidity crisis to fund the extraordinary liquidity drains elsewhere in the business, including margin calls on European sovereign debt positions,” Jarrell said in the statement.
MF Global filed the eighth-largest U.S. bankruptcy, with $41 billion in assets on Oct. 31, 2011, after making bets on European sovereign debt and getting margin calls.
The Chapter 11 case is In re MF Global Holdings Ltd., 11- bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The liquidation of the broker is In re MF Global Inc., 11-bk-02790, U.S. Bankruptcy Court, Southern District of New York (Manhattan).