MF Global Creditors take action in wake of Bankruptcy

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Since the bankruptcy filing of MF Global on October 30, the brokerage firm’s creditors have started to take action to recover their losses. These include suing the company’s advisers, searching for assets overseas and seeking information from a probe into the mingling of customer accounts. MF Global’s liabilities amount to $39.7 billion and its assets are valued at $41 billion. The firm has said it has about $26 million in cash. But about $593 million of MF customer funds cannot be unaccounted for.

At this point, the trustee overseeing the liquidation of MF Global’s operating unit, James Giddens has started an investigation into possible fraud or misconduct, as has the FBI. Giddens was allowed by the bankruptcy court to investigate the company’s directors and officers, lenders and other investors. The investigation will be centered primarily on customer recoveries. Besides the FBI, other government agencies investigating are the Commodity Futures Trading Commission and the Securities and Exchange Commission. MF Global requested an extension to the usual 14-day period to provide its list of assets and debts and was granted an extension till January 30 to do so.

The trustee is facilitating the formation of a creditors’ committee to look after their interests. The majority of these creditors are unsecured bondholders. But creditors and bankruptcy lawyers may hesitate to get involved in the case because of fears that it may have insufficient funds to pay the committee’s legal fees.

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