"Some of the likely litigation targets are MF Global's main trading partners, its primary banker JPMorganChase, and clearinghouses that processed last minute trades for MF Global as it spiraled towards bankruptcy. Another possibility is MF Global's own United Kingdom affiliate, where about $700 million in customer money is tied up.
But recovering any funds won't be easy.
'In terms of resources, the worst counterparty in the world to go up against in court is the government,' said one bankruptcy lawyer, who asked not to be named due to relationships with firms that have a stake in the outcome of potential litigation. 'The next is JP Morgan.'"
In a brokerage bankruptcy the customers have priority over other creditors including bondholders, who in this case include some hedge funds. The CFTC is on record for this in the case of MF Global. But the CFTC seems to be a relatively toothless regulator these days. They have been sitting on a silver market manipulation case for over three years for example, and cannot even begin to say 'peep' about it, except to occasionally make lame excuses for what everyone knows has been happening.
As an interesting sideshow, Louis Freeh had exclusive possession of the MF Global emails and other evidence, and refused to share it with government agencies until his attorneys had an opportunity to sift through them, and 'find no evidence of wrongdoing.'
Customers of the other big brokers that went bust, like Lehman for example, did not have this sort of problem. They were made whole on their accounts.
Mackie Messer, otherwise known as JP Morgan or simply 'The Morgue,' held an unsecured credit line with MF Global for $1.2 billion, but they managed to snatch the funds in the last week of their operations it appears, and lawyered up on various fronts to make sure they hang on to it.
As Chris Whalen said, we know who has the money, we've always known where it was. The question is how willing and able the system is to make them give it back.
Equal protection under the law is apparently just a theoretical objective these days. It seems to mean that everyone is free to hire as much legal power and political influence as they can afford and then let the stronger party win. And the poor and the rich are both permitted to sleep under bridges in cardboard boxes if they wish. That's only fair.
One can only imagine if anyone will be prosecuted, and at most, some lieutenants may settle up while admitting no guilt.
Battle lines forming between MF Global customers, hedge funds
By Nick Brown and Katya Wachtel
Fri Feb 24, 2012 2:36pm EST
(Reuters) - The MF Global saga could soon become a legal battle between hedge funds and the futures brokerage's shortchanged customers, with more than a billion dollars at stake.
As the investigation into the collapse of the Jon Corzine-led brokerage moves into more of a regulatory whodunnit than a criminal case, the guessing game centers on who the two court-appointed trustees overseeing MF Global's liquidation will sue to recoup money owed to customers of MF's broker-dealer unit and creditors of its parent.
Those decisions are not easy ones, legal experts say, and they could end up pitting hedge funds like David Tepper's Appaloosa Management and Paul Singer's Elliott Management - who own MF Global bonds - against brokerage customers trying to recover an estimated $1.6 billion shortfall in their accounts.
It's likely that James Giddens, the trustee in charge of recovering customer funds, and Louis Freeh, the trustee in charge of recovering money for parent creditors, will dispute the ownership of certain assets, said attorney Chris Ward, vice chair of Polsinelli Shughart's bankruptcy practice, who is not involved in the case.
A more complex battle could arise from the fact that both customers and bondholders claim priority for payouts from MF Global's general estate...
Read the rest here.
The fog of cover up has been wafting heavily over this entire scandal since the first week. I doubt very much that the real truth will ever be fully disclosed. I just hope that the customers, who are surely victims of a corrupt financial system, are able to recover their money.
“Thou shalt not be a victim, thou shalt not be a perpetrator, but, above all, thou shalt not be a bystander."You may wish to keep this aphorism in mind with regard to your financial transactions going forward, whether you are in the US, Canada, Asia, or Europe.
