A judge approved a $2.2 billion transfer to U.S. commodities customers of fallen brokerage MF Global on Friday as a trustee acknowledged there were suspicious transfers leading up to its Oct. 31 collapse.
The judge overruled several objections to the transfer at a hearing on Friday in U.S. Bankruptcy Court in Manhattan, including from customers who traded on foreign exchanges.
The customers, which are owed nearly $900 million, are not included in the transfer, according to James Kobak, lead attorney for James Giddens, the trustee unwinding the futures brokerage.
Giddens is working to get money back for customers whose accounts were frozen when the brokerage's parent company declared bankruptcy on Oct. 31 under the stewardship of Jon Corzine, a former Goldman Sachs chief executive and former New Jersey governor and U.S. senator. Corzine resigned from MF Global on Nov. 4.
Most of the transfer should be completed in a few days, though portions of it could take as long as four weeks, the lawyers said.
Giddens and several federal regulators are investigating the cause of a massive shortfall in the company's customer accounts, which Giddens has estimated at $1.2 billion.
Kobak said for the first time at Friday's hearing that the investigation led his team to believe suspicious transfers had been made from customer.
Kobak told U.S. Bankruptcy Judge Martin Glenn that he could not go into details of the investigation. But when the judge asked whether the investigation suggested "suspicious or unexplained" transfers from customer accounts leading up to the collapse, Kobak, after a pause, answered in the affirmative.
A spokesman for Giddens said after the hearing that Kobak felt compelled to answer the judge but that his team is unlikely to offer more detail on the matter.
"There's a great deal of reticence on our part" to comment on the nature of the investigation, spokesman Kent Jarrell said. Giddens is expected to testify on Tuesday before the U.S. Senate Agricultural Committee. It is unclear whether Giddens will offer more detail on the probe at that time.
Jarrell said the estimated $1.2 billion shortfall now may include funds from foreign exchange customers, not just those at U.S. depositories. He added, however, that the estimated amount of the shortfall had not changed.
Corzine told the U.S. House Agriculture Committee on Thursday that he did not know what happened to the missing money.
The latest transfer drew the ire of customers holding physical assets, such as gold bars, who argued they should receive 100 percent distribution because it would be difficult to split such assets into percentages. Glenn overruled the objections but said Giddens should work with those customers to determine a fair transfer.
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