MF Global knows its former clients’ pain

November 10, 2011

Futures customers who smartly pulled their money out of failed MF Global Holdings Inc. in the weeks or months before the broker’s Oct. 31 collapse may not have escaped calamity after all.

As Reuters’ Jeanine Prezioso reports, some are worried the bankruptcy trustee could come after those funds to force them to share in any losses.

MF Global knows the feeling. It’s been there, and done that.

After futures broker Sentinel Management Group Inc failed in 2007, the trustee in that case, Frederick Grede, sued 50 of its former customers to recoup $600 million in funds withdrawn prior to the bankruptcy.

Among them was MF Global, which had withdrawn $50 million from Sentinel shortly before Sentinel froze all accounts in a desperate effort to avert catastrophe.

MF Global, like Sentinel’s other customers, had deposited its own customers’ funds with Sentinel, which promised to deliver higher returns on those funds than MF Global could have generated on its own.

Instead, the broker collapsed, and four years later Sentinel’s trustee is still trying to get former customers, including MF Global, to share in Sentinel’s massive losses –nearly all of which, Grede says, stemmed from the broker’s failure to keep customer funds separate from its own.

Failing to keep customer funds separate from its own, of course, is exactly what MF Global’s first-line regulator has accused the broker of doing, resulting in the disappearance of some $600 million from MF Global’s accounts. And with MF, as with Sentinel, if the shortfall persists, customers will likely have to share in the losses.

MF Global lists the Sentinel matter in its most recent quarterly Securities and Exchange Commission filing, one among 12 legal proceedings against the company.

“MFGI believes there are meritorious defenses available to it and it intends to resist the Trustee’s attempt to recover those funds from MFGI,” it says.

Indeed. The matter is on hold, pending MF Global bankruptcy proceedings.

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Why there is no more coverage about this theft in the media? Media should talk about these issues over and over again. Where is the senate finance committee? People’s money is stolen and this is how it is being handled? Who will trust to the financial system in US? How many more Madoff or Corzine do we have to have in order to do something? Which idiot can blame the “Occupy Wall Street” movement? Enough is enough.
The authorities MUST do more about this and any other potential problems that our financial system may face. If they don’t wanna do it they should not seek office.
Corzine has to share the cell with Madoff. They belong to the same camp. Where were the CFCT,CME,SEC when all these theft was taking place? They don’t audit these brokers?
Why does it take 2 weeks to find out what happened to mf global and missing customers money?? Look at the world and look at us and we try to teach others about things that we don’t pursue, we don’t believe and we don’t BELIEVE……

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