Seven Banks That Helped MF Global Holdings Ltd are Sued by Pension Funds; $1.2 Billion may be Missing from Customer Accounts

The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity... So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy. - Ann Barnhardt, "The Entire System Has Been Utterly Destroyed By The MF Global Collapse" - Presenting The First MF Global Casualty, Zero Hedge, November 17, 2011

MF Global Customer Accounts May Be Missing $1.2 Billion, Trustee Says

November 21, 2011

Washington Post - The amount of customer funds missing from accounts at the bankrupt brokerage MF Global “may be as much as $1.2 billion or more,” the trustee overseeing the firm’s liquidation said Monday.

That would be roughly double previous estimates of about $600 million.

In a statement, trustee James W. Giddens said the estimate is preliminary and “may well change.”

MF Global collapsed while under the leadership of Jon S. Corzine, who was previously governor of New Jersey, a U.S. senator, and the head of Goldman Sachs. MF Global made costly bets on European government bonds.

A variety of federal and industry authorities, including the FBI, have been trying to track down money that should have been kept in customer accounts.

“At present, the Trustee believes that even if he recovers everything that is at US depositories, the apparent shortfall in what MF Global management should have segregated at U.S. depositories may be as much as $1.2 billion or more,” the trustee said in the Monday statement.

The trustee said his investigation is continuing “around the clock” in close coordination with the Department of Justice and others.

Seven Banks Sued Over MF Global Collapse

* Bank of America, Citigroup, Goldman, others sued
* Banks said to help sell $900 million bonds
* Banks decline to comment or did not respond to requests

November 18, 2011

Reuters - Seven banks that helped MF Global Holdings Ltd (MFGLQ.PK) sell bonds were sued by pension funds who said the bonds' offering prospectuses concealed problems that led to the futures brokerage's collapse.

The lawsuit was filed Friday afternoon in Manhattan federal court against units of Bank of America Corp (BAC.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N), Jefferies Group Inc (JEF.N), JPMorgan Chase & Co (JPM.N) and Royal Bank of Scotland Group Plc (RBS.L).

Other defendants include several officials associated with MF Global, including former Chief Executive Jon Corzine.

Friday's lawsuit may be one of the earliest efforts for investors to recover money from relatively deep-pocketed defendants that they believe may share in responsibility for MF Global's Oct. 31 bankruptcy.

Bank of America spokeswoman Shirley Norton, Citigroup spokeswoman Danielle Romero-Apsilos and Jefferies spokesman Richard Khaleel declined to comment. The remaining banks did not immediately respond to requests for comment.

According to the complaint, the registration statements and prospectuses for about $900 million of MF Global note offerings this year omitted how the company was using high leverage, investing heavily in risky European sovereign debt, and not properly segregating client assets from its own.

It said the seven banks helped draft the offering documents and sell the notes, collecting $21.2 million of fees, but that their "failure to conduct an adequate due diligence investigation was a substantial factor" in MF Global's collapse, as well as in defaults on the notes.

The lawsuit was brought by the IBEW Local 90 Pension Fund in Connecticut, and the Plumbers' and Pipefitters' Local #562 Pension Fund in Missouri, and seeks class-action status.

It seeks damages for investors between Feb. 3, 2011 and Oct. 31, 2011 in MF Global securities, including its 1.875 percent convertible senior notes maturing in 2016, its 3.375 percent convertible senior notes maturing in 2018, and its 6.25 percent senior notes maturing in 2016.

MF Global is not a defendant because of the bankruptcy.

The case is IBEW Local 90 Pension Fund et al v. Corzine et al, U.S. District Court, Southern District of New York, No. 11-08401.

RBS Faces Lawsuit Over MF Global Collapse

Royal Bank of Scotland is facing legal action over the collapse of MF Global after two pension funds named the bank in a court action claiming that misleading statements were made about the broker’s $6.3bn (£3.9bn) exposure to European sovereign debt.

November 19, 2011

Telegraph - The IBEW Local 90 Pension Fund and the Plumbers & Pipefitters’ Local #562 Pension Fund are suing RBS, JP Morgan and Goldman Sachs in a class action lawsuit in New York, following the collapse of the broker, Bloomberg reported.

The pension funds claim that MF Global’s stock traded at “artificially inflated prices,” as a result of the banks’ misleading statements. “While the extent of MF Global’s exposure to European sovereign debt was concealed, the defendants were able to raise some $900 million in the offerings,” they said.

The funds’ case is understood to rest on a number of notes, largely underwritten by JP Morgan and Goldman Sachs.

However, RBS, which is 83pc owned by British tax payers, has also underwritten a small percentage – leaving it exposed if MF Global’s clients do not recover their money. RBS declined to comment.

Other defendants named in the case include Bank of America, Deutsche Bank, Citigroup and Jeffries. MF Global executives are also named including Jon Corzine, the former joint chief executive of Goldman Sachs who ran the business before it failed.

MF Global filed for bankruptcy less than two weeks ago after it took a $6.3bn position on European government debt which was undone by eurozone market volatility and destroyed market confidence in MF Global.

Its 1,000 US staff worked their last day for the company on Friday, and it has been reported in Australia that the local arm of MF Global has been closed by its administrator, Deloitte, after no buyers could be found.

Clients of MF Global have had their money in the account frozen for more than two weeks, with very little access to information about when the situation might change.

They have complained that even funds held in segregated accounts entirely separate from the broker remained frozen, disrupting many businesses.

On Friday, the administrators of MF Global UK, KPMG, said they have finally begun to see the first return of funds to the collapsed broker’s London-based arm, and that it would return money to customers “as soon as possible”.

Its liquidator in the US has warned that there is “no assurance of 100pc return”. However, the broker is understood to have moved hundreds of millions of dollars in customer funds to the Bank of New York Mellon Corporation in August, meaning some of the cash may be sheltered.