The bankrupt brokerage, MF Global Holdings Ltd (MF Global), is in the news again today after another round of settlements stemming from its collapse in 2011.
Prior to its financial woes, the brokerage had been providing exchange-traded derivatives as well as over-the-counter products such as contracts for difference (CFDs), foreign exchange and spread betting.
After a bad bet on European sovereign debt left the company seriously in the red, MF Global made improper transfers totalling more than $891 million from client funds to cover the loses.
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The preliminary $64.5 million all-cash settlement, which was disclosed today in a court filing, stems from a litigation filed by investors against former executives and directors of MF Global. The settlement must be approved by a federal judge in Manhattan, according to Reuters.
The most high-profile of the nine accused is Jon Corzine, former governor of New Jersey, who was chief executive of the brokerage. Corzine sought to turn MF Global from a brokerage into a mid-tier investment bank. As such, the company took on more principal risk, including the aforementioned European sovereign portfolio, which ultimately left MF Global insolvent.
The settlement is the most recent in a string of lawsuits related to MF Global’s downfall. In April, PricewaterhouseCoopers (PwC) settled a lawsuit with MF Global investors, who accused the auditor of fraudulent deceit. Investors claimed that PwC, which agreed to pay $65 million in cash to settle the lawsuit, failed to disclose MF Global’s fatal issues despite being aware of them. Some of MF Global’s underwriters also settled to pay a total of $74.9 million.
The latest settlement therefore boosts the investors’ recovery to $204.4 million, a substantial sum given that MF Global went bankrupt. A number of claims remain, including more against PwC and the banks that helped underwrite the bad bonds.