MF Global Holdings Ltd. Files for Bankruptcy While Its Broker-Dealer Faces Liquidation and Securities Lawsuit by SIPC
In U.S. Bankruptcy Court in Manhattan, MF Global Holdings Ltd. has filed for Chapter 11 bankruptcy. The holding company for broker-dealer MF Global Inc., which faces liquidation, has listed assets of $41 billion and debt of $39.7 billion.
This is the fifth-largest financial industry public company bankruptcy when measured according to assets. Larger ones were those involving Lehman Brothers Holdings Inc., Conseco Inc., CIT Group Inc., and Washington Mutual Inc. Per BankruptcyData.com., of any public company, it is the eight largest bankruptcies by assets.
Meantime, the Commodity Futures Trading Commission and the Securities and Exchange Commission says that they were notified by MF Global Holdings Ltd. that there might be some deficiencies with certain customer accounts. The regulators are trying to determine whether approximately under $700 million has gone missing.
in U.S. District Court in Manhattan, Securities Investor Protection Corp. is suing MF Global. SIPC wants the united liquidated for the protection of customer assets. Because MF Global is a broker-dealer, it cannot seek bankruptcy protection and either has to liquidate or sell its assets. Sale negotiations have faltered. Potential buyers had included Jeffries & Company and Interactive Brokers. The latter was about to seal the deal but backed out after finding out about the missing monies.
Jon Corzine, who was the former co-chair of Goldman Sachs Group Inc. (GS), runs MF GLOBAL INC. . It owns $6.3 billion of Portuguese, Italian, Irish, Belgian, and Spanish debt. Worries that in light of Europe’s debt crisis it might lose money on the holdings, regulators urged it to raise capital, issue margin calls, make credit downgrades, and file for bankruptcy, which was ultimately determined to be the safest course of action for customers’ protection.
The CFTC reports that as of the end of August, MF Global had $7.2 billion of customer funds in segregated accounts. The broker dealer of equity, derivatives, commodities, and foreign exchange belongs to over 70 financial exchanges and was one of the main dealers allowed to trade US government securities with the New York Fed.
For now, Corzine and MF Global have not been accused of any wrongdoing. Regulators are still trying to determine whether sloppy internal systems caused the money from client accounts to become misallocated or if something more intentional was at play. While it isn’t rare for some funds to be MIA when a financial firm falters, the mount of money missing from the broker-dealer is disturbing.
Unsecured creditors for MF Global include JPMorgan ( less than $80 million of the debt), Headstrong Services LLC, ($3.9 million) , Sullivan & Cromwell LLP ($596,939), CNBC (845,397), Bloomberg Finance LP ($276,064), and Oracle Corp. (302,704).
Related Web Resources:
Regulators Investigating MF Global for Missing Money, NY Times, October 31, 2011
Corzine's B-D could be liquidated, Investment News, November 1, 2011
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