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Reuters reported JPMorgan Chase & Co, a financial services firm, settled for $546 million with the trustee of MF Global Holdings in the case In re: MF Global Inc. case No. 11-2790, in U.S. Bankruptcy Court, Southern District of New York.
MF Global Holdings is a failed broker-dealer unit that is liquidating. The $546 million was shown in a court filing, and is meant to assist repaying the brokerage’s customers for losses. James Giddens threatened a lawsuit against JP Morgan if it did not return money transferred to the bank from MF Global. By June 2012, JPMorgan returned $608 million to the MF Global.
Giddens is the trustee who is involved in liquidating MF Global. Giddens is chair of Hughes Hubbard & Reed LLP’s Corporate Reorganization and Bankruptcy Group. Giddens is a lawyer that is known for his work on brokerage firm liquidations. He was picked by the Securities Investor Protection Corporation to be trustee on several liquidations. Giddens graduated from Yale Law School. He represents financial institutions in corporate reorganization and insolvency situations.
In the deal with JP Morgan, JPMorgan will pay $100 million for distribution to past brokerage customers. The bank will return more than $29 million of MF Global’s funds held by JP Morgan, while releasing claims on $417 million.
Giddens said in a court filing:Â “The settlement agreement resolves claims by the trustee and customer representatives against JPMorgan that would otherwise result in years of costly litigation between the parties with an uncertain outcome.”
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JPMorgan was the lead on a $1.2 billion loan to the broker-dealer. The bank was one of MF Global’s primary clearing banks prior to the brokerage going bankrupt in 2011. JP Morgan had retained claims on some of the collateral posted by MF Global. The claims led to the legal battle. Regulators found an issue with about $1.6 billion missing in the trading accounts of MF Global’s trading customers. The case has brought bad press to JP Morgan.
Giddens will ask the bankruptcy court to authorize distribution of $250 million to former customers of the broker-dealer. These are customers who traded on United States exchanges and foreign exchanges, according to the court filing. Of the $250 million, $50 million will go to customers who traded on foreign exchanges.
When MF Global declared bankruptcy, commodity traders with personal accounts lost money in the millions. According to Giddens, the use of client money to cover corporate transactions was not proper. MF Global customer accounts were frozen when the broker-dealer declared bankruptcy.
