MF Global shortfall may be up to $1.2 bn

The shortfall in MF Global Inc’s US segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, said a trustee overseeing a liquidation of the failed brokerage.

That would mean customer accounts are missing about 22 per cent of their total of $5.4 billion. A shortfall of 11 per cent had been previously estimated by a person with knowledge of probes into the firm’s collapse. James Giddens, the trustee, said yesterday that forensic accountants and investigators were working “around the clock,” and the estimate may change.

“Our goal is still a 100 per cent return, and right now, we’re very close to 60 per cent,” said Kent Jarrell, a spokesman for the trustee. “If we continue to recover more, that will determine how much more we can distribute.”

Jarrell said the $1.2 billion estimate came from the team of accountants and investigators who met with the trustee last night, prompting him to publish the revised figure. The spokesman declined to comment on whether there was news as to who was responsible for the funds or how they were withdrawn or used, citing ongoing investigations from the Department of Justice and other agencies.

ASSETS UNDER CONTROL

Giddens said distributing 60 per cent of what should have been in commodity customers’ accounts, already under way, would take $1.3 billion to $1.6 billion, or almost all of the assets he had within his control. While he expected the transfer to occur in early December, he didn’t have access to funds beyond $1.6 billion, he said.

The shortfall is primarily in commodity accounts. Money frozen in securities accounts will be refunded through a separate segregated account, Jarrell said. MF Global had 38,000 commodity clients. “He is very close to exhausting the funds under his control,” according to the statement. Recovering funds from foreign depositories may take more time, Giddens said.

Source: Business Standard