A bankruptcy court judge approved a broad settlement deal on Thursday that paves the way for MF Global customers to recover much of the $1.6 billion that disappeared when the brokerage firm blew up in 2011.
In an order issued late Thursday, Judge Martin Glenn approved a payout that will bring most of MF Global’s United States customers to 93 percent of their original investment, up from 80 percent.
The ruling closes a particularly contentious chapter in the MF Global story and puts customers on the path to a near full recovery. The deal resolved a bitter dispute among trustees â€" James W. Giddens and Louis Freeh â€" who have spent 15 months unwinding the firm and clawing over limited resources. Mr. Giddens is tasked with recovering money for customers, while Mr. Freeh advocates for the banks and other companies that make up MF Global’s creditors.
Under the terms of their accord, initially struck in December and formally approved by the judge on Thursday, Mr. Freeh dropped some $2 bilion in claims he made against Mr. Giddens. The pact also allowed Mr. Giddens to make peace with an overseas administrator tending to the firm’s British unit, who agreed to dole out up to $600 million to the trustee.
In a hearing in lower Manhattan, Judge Glenn praised the deal, saying he was “very pleased.†He later issued a ruling, noting that it the deal “puts to rest a complex and expensive dispute that has held up the distribution of a substantial amount of funds.â€
A spokesman for Mr. Giddens, Kent Jarrell, said the trustee as “pleased with the judge’s decision†and he expects to begin making “significant distributions†within weeks.
The move will represent a remarkable turnaround from the firm’s 2011 bankruptcy filing, when the chances of a major recovery seemed remote. It also could set up the chance of a full recovery for customers.
In addition to the upcoming payouts, Mr. Giddens has identified a way that, if sent to the judge and approved, could! plug the remaining shortfall for customers in the United States, according to people involved in the case. The plan would rely on Judge Glenn allocating a small portion of the general MF Global estate to customers.
They recovery would follow an aggressive campaign by customers to recoup their funds. Thousands of ranchers, farmers and hedge funds were locked out of their accounts on Halloween 2011, when the firm filed for bankruptcy. It later emerged that, in a futile and perhaps accidental attempt to save the firm, MF Global employees transferred customer money to clearinghouses and banks like JPMorgan Chase.
