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in 2007, the trustee in that case, Frederick Grede, sued 50 of its former customers to recoup $600 million in funds withdrawn prior to the bankruptcy.
Among them was MF Global, which had withdrawn $50 million from Sentinel shortly before Sentinel froze all accounts in a desperate effort to avert catastrophe.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.