Customers of MF Global’s failed broker-dealer unit and the trustee overseeing its liquidation won court approval for a US$546 million (HK$4.2 billion) settlement with JPMorgan Chase.
The settlement, announced in March, resolved claims levied by James Giddens, the trustee winding down MF’s broker-dealer unit MF Global, and by the broker’s former customers, who are pursuing a federal class action over MF Global’s collapse in 2011.
MF Global, the commodities brokerage headed by ex-New Jersey Governor Jon Corzine, filed for bankruptcy amid concerns by investors about its exposure to US$6.3 billion (HK$48.8 billion) in sovereign debt.
Approval of the JPMorgan settlement comes a week after the Commodity Futures Trading Commission sued Corzine over the collapse and announced a US$100 million (HK$775.4 million) settlement with MF’s broker-dealer.
At a rare joint hearing in Manhattan, US Bankruptcy Judge Martin Glenn, who is overseeing the liquidation, and US District Judge Victor Marrero, who presides over the class action, approved the JPMorgan accord.
“I find the proposal fair, reasonable and in the best interests of the class,” Marrero said.
Giddens has said the settlement will allow him to eventually return 100 per cent of customers’ money, which was frozen when MF Global went bankrupt. Most customers have already recovered around 90 per cent of their funds.
JPMorgan had been the lead on a US$1.2 billion revolving credit facility to MF Global’s parent and one of its primary clearing banks leading up to its bankruptcy.
Under the settlement, JPMorgan will pay US$100 million to benefit former customers. It has also agreed to return more than US$29 million in brokerage funds and to release claims on US$417 million it earlier returned to Giddens.
The latest settlement also ties up a loose end in Giddens’ settlement with MF Global’s UK unit, announced earlier this year. That settlement, expected to bring in US$500 million to US$600 million for the broker-dealer’s estate, required a resolution of JPMorgan’s claims.
“The overall settlement unlocks over US$1 billion for customers and other creditors,” James Kobak, the lead attorney for Giddens, said at Wednesday’s court hearing.
The bank will make a separate US$7.5 million payment for attorneys’ fees and expenses to lawyers representing the customers in the class action, court papers show. Marrero approved the fees Wednesday.