Market Matters Blog

MF Global to Pay Restitution, But That Doesn't Change Much

A federal court ordered MF Global to pay $1.2 billion of restitution to its customers, but that doesn't mean they'll get more money. Earlier this month, a judge approved a final round of payments that will make customers whole.

"It's not in addition to sums already paid, it is simply an order to return the amount the Trustee noted as missing to customers," said John Roe, a co-founder of the Commodity Customer Coalition, which has advocated for customer rights in the wake of the MF Global and Peregrine Financial scandals. "Additional recoveries may be made possible through the class-action lawsuit now underway, but that remains to be seen."

Aspects of that lawsuit have been able to move forward, like a $100 million settlement with JP Morgan that occurred last March, Roe said. The primary class-action lawsuit can't get underway until the MF Global's parent firm, MF Global Holdings, completes its liquidation.

CFTC announced the restitution order Monday morning along with notice that MF Global's been charged a $100 million civil penalty, and "MF Global admits to the allegations pertaining to its liability based on the acts and omissions of its employees as set forth in the consent Order and the Complaint. The CFTC’s litigation continues against the remaining defendants: MF Global Holdings Ltd., Jon S. Corzine, and Edith O’Brien."

Last summer, CFTC filed a complaint that argued MF Global unlawfully used customer segregated funds -- the collateral customers put up to secure their trades -- for its proprietary trading. CFTC also outlined how MF Global failed to notify regulators of deficiencies in customer accounts, filed false statements on those accounts, put customer money in inappropriate investment tools and failed to "diligently supervise the handling of commodity interest accounts carried by MF Global and the activities of its partners, officers, employees, and agents."

So, if you're a farmer or an elevator manager that used MF Global, this development doesn't affect your bottom line, but it does advance the case in a few ways. MF Global admitting to the allegations about its liability could potentially play into the continuing cases against Corzine and O'Brien. Today's announcement is also one step closer to bring the class-action case to the courtroom.

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