This page has been archived and commenting is disabled.

A Spurious Motion on Behalf of the MF Global Trustee

EB's picture




 

Submitted by Andrew Abraham of MyInvestorsPlace.com

 

The court received a motion today by lawyers of Hughes Hubbard and Reed, opposing an official commodity customer and broker committee.

In a strangely constructed argument, attorneys for the Trustee open with that within “Within hours of his appointment on October 31, 2011, and against a backdrop of shortfalls in segregated funds and records that are far from wholly reliable, the Trustee moved and has already affected the transfer of three million open positions associated with over 14,500 commodity customer accounts.”

But this is NOT what happened. Customer funds were immediately frozen in violation of segregation of customer funds. Neither customers nor customer brokers were given instruction by the Trustees, other than a single number where positions may be liquidated. The orders given by the Trustee to demonstrated a grievious lack of understanding of the industry in which MFGI operated. What happened is this: the following week (not in a few days) those positions that were not liquidated, were then liquidated under order of the Trustee, and new positions at a new basis were opened. (Often positions were not liquidated because there was limited possibility as all customer and broker order terminals were frozen, even for liquidation only.) Then only percentage of supporting margin and the new positions were received by new brokers. No accounts were moved. To represent that is intentionally misleading to the public. Instead we had a disruptive and costly procedure with no basis in the established workings of futures markets and account management.

In this motion the attorneys state the Trustee seeks cooperation and assistance from SIPC, the CFTC and CME group. (In other words, butt out customers!) SPIC is neither organized nor qualified to assist in return of segregated funds of futures accounts. Both the CFTC and CME have grossly failed their responsibilities to the industry and customers of the industry.

The final arguments ends with these points among others:

That there Is No Legal Basis for the Formation of a Commodity Customer or any Other Official Committee in a SIPA Proceeding. Yes, but SIPA “Act” was not written for commodity accounts. So why is this even a SIPA Proceeding?

That there has never been a creditors’ committee or a customer committee appointed in a SIPA proceeding in the statute’s forty-year history. Is that the logic of law? Just because…? There has also never been a bankruptcy of an FCM where customer funds wound up in the hands of a Trustee in the entire 150 history of organized futures trading in the US:

The rest of the argument is based on SIPA, which was not enacted by Congress on behalf of Commodity Customer protection. The motion before the court also states, “The Movants seem to believe that the Trustee’s administration of the fund of commodity customer property requires the appointment of a committee solely to protect the interest of commodity customers.” Yes, indeed, based on the bizarre administration so far. The “Movants” (customers who have made a move to the court) represent over a billion in customer segregated funds that the Trustee is treating as part of the “estate” of MF Global.

The rest of the motion is self congratulatory praise and banter. The Honorable Judge Glenn has shown himself not to tolerate sloppiness, time wasters and fools. It will be interesting to see how this motion is received by the court.

-------------------------------------------------------------------------

UPDATE from MFGFacts.com:

 

Trustee Giddens Did Not Say a 1.2 Billion Shortfall. But Media Goes Hysterical!

$1.2 Billion now might be old news…Forbes came out with $1.7 Billion missing from client accounts.

 

Yesterday we smelled something dirty rising out of the spin machine with the Trustee statement to the press that the “shortfall” is larger than previously reported. In true form, hysterical media reported the “apparent shortfall” as a fact and succeeded in increasing the fear and confusion around the case. The APCO World Wide Spin Meister magic worked with our entire culpable press yesterday as we were bombarded with screaming headlines of more missing money.

Yet when reading the statement NO WHERE do we read that more funds are missing. Only that it could be, or is apparent.

Why the dishonest spin?

Trustee Giddens is suddenly under increasing public pressure to release as much of the client assets as possible. And he is resisting not only that, but even customer representation in the courts. Why should the Trustee be concerned about the size of the MF Global estate? And what is his problem with all these pesky customers?

1.) The largest unsecured creditors are JP Morgan and other banks. The larger the estate, the more they will have returned. Motions to the court indicate that Trustee has their interests in mind. After all, JP Morgan is one of the largest clients of the Trustee’s firm, Hughes Howard & Reed. Both the Trustee and JP Morgan are fighting hard to put your assets into the estate of MF Global.

That also explains the Trustee’s moaning that he will wind up empty if he returns MF Global client assets, and that client funds amounts to “virtually all of the assets currently under the Trustee control.” What he is saying by crying poor is indirectly pleading with the court not to allow that to happen!

2.) There are a number of motions to the court on behalf of customers. If customers are given standing in the courts, this risks the ongoing gig to allow a continued theft of customer assets. Why continued theft? If there really was commingling or dipping into client funds, and if the courts allow client funds to go into the estate for creditors, it assures both creditors such as JP Morgan and Bank of America as well as the Trustee, a greater return. In essence the Trustee is attempting to commingle customer accounts with the MF Global estate!

For those interested a parsing of the spin on the claim:

Parsing of 211111 Statement

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 11/29/2011 - 20:52 | 1928122 Ron Hera
Tue, 11/22/2011 - 15:00 | 1903497 MrBoompi
MrBoompi's picture

You are not a capitalist if you fail to take advantage of an opportunity that allows you to legally take someone else's money.  And you are not a US banker if you fail to take advantage of an opportunity to illegally take someone else's money.  Even if you "get caught", your punishment will only be a fine of about 5-10% of the money you stole and you can even keep your job!

Mon, 11/28/2011 - 16:02 | 1922319 11b40
11b40's picture

....and get a bonus.

Tue, 11/22/2011 - 14:41 | 1903387 Uncle Remus
Uncle Remus's picture

Go long incense. The stench of corruption is going to get worse. It's just dis-gusting.

Tue, 11/22/2011 - 14:36 | 1903358 willien1derland
willien1derland's picture

So much for the 'rule of law'...this is even the application of the 'Golden Rule' These are thugs - pure & simple - It is my hope that the Karma Police show up & provides the BITCH SLAP OF THE CENTURY! 

Tue, 11/22/2011 - 15:33 | 1903683 donsluck
donsluck's picture

Unfortunatly karma is random.

Tue, 11/22/2011 - 14:35 | 1903346 Antifederalist
Antifederalist's picture

JP Morgan to buy MF Global Stake in the LME.

http://jessescrossroadscafe.blogspot.com/

Well isn't that special.  Hey if they get a priority lien on the Assets right next to the Segregated Account Holders they will just be paying themselves for the purchase.

Ugh.

 

Tue, 11/22/2011 - 14:30 | 1903316 Pitchman
Pitchman's picture

 

MF Global is a fractal in a frying pan.

 Trillions of CDS with nothing to back it

Europe's Voluntary Haircuts?, CDS Market Sham & B of A: Less Than Zero

 
The Disappearance of Chivalry - George Santayana & Murder By Joystick

Tue, 11/22/2011 - 14:24 | 1903279 kaiserhoff
kaiserhoff's picture

Only on ZH.  Now we are getting somewhere.

Saw a conservative gab fest where some one said Solyndra would be the end of Obama's political career.  Maybe not, but this shoud be.

Tue, 11/22/2011 - 14:21 | 1903267 imsaul0968
imsaul0968's picture

For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals.  If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:

eclark@breakaway-partners.com

and I'll add you to the weekly market commentary & portfolio update distribution list.  Its free to add you and you can follow along our model and our views.  We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt. 

Tue, 11/22/2011 - 14:15 | 1903242 11b40
11b40's picture

$1.2 billion.  Think about that.

If we tallied up all the $ that all the prisoners currently sitting in American jails actually stole, do you think it would come to $1,200,000,000.00?

These numbers being tossed around during this financial debauchery are simply amazing.  Millions used to get our attention, but now it takes billions just to cause an eyelid to be raised.  The theft is on such a scale as to be incomprehensible.

Tue, 11/22/2011 - 14:19 | 1903262 Bananamerican
Bananamerican's picture

"The theft is on such a scale as to be incomprehensible"

at that level, criminals and sociopaths become safe from prosecution....

Tue, 11/22/2011 - 14:14 | 1903237 Smiddywesson
Smiddywesson's picture

The Pentagon announces it lost a trillion dollars just before 911

Iraq is looted and their money is taken

Pallets of money shipped to Afghanistan and Iraq just disappear

and the accounts of hard working customers of MF Global are wantonly looted and there are absolutely no answers about where the money went.

If anyone thinks they can ride out this storm in ANY paper account, with this degree of disregard for the rule of law, they are crazy.  Nothing is safe from this level of thievery.  We are slipping into a post-Soviet culture, where anything that isn't nailed down will be stolen.  Transfer everything you have into physical.  Pay the early withdrawal penalties and take it out now, before a trustee takes it out for you.

 

Tue, 11/22/2011 - 14:46 | 1903415 dexter_morgan
dexter_morgan's picture

I wonder if Gerald Celente would dispute that today?

Tue, 11/22/2011 - 14:09 | 1903219 Joebloinvestor
Joebloinvestor's picture

The CME and the CFTC are scared shitless that the truth is; THERE IS NO CONTROL.

"Supposed to segregate"?

BFD.

Violation of "rules"

BFD

How about a violation of LAW as in THEFT OF FUNDS?

I hope the CME is found culpable.

Don't even get me started about the INEPT SEC who relegated their authority to police to these clowns at the CME and CFTC.

Tue, 11/22/2011 - 14:16 | 1903245 El Viejo
El Viejo's picture

Congress says we need a stronger SEC. Sooo SEC goes out and rents office space. Then congress cuts budget to SEC.

Tue, 11/22/2011 - 13:57 | 1903162 Nobody For President
Nobody For President's picture

The fix has been in since the day the judge was appointed.

Tue, 11/22/2011 - 13:55 | 1903153 Clowns on Acid
Clowns on Acid's picture

If Corzine was such a "winner" (ex CEO of Goldman, ex Gov of NJ, largest Obama bundler, US Sec of Treasury in waiting) why does "sloppiness of bookeeping" exist w/ MF Global?

Why isn't Corzine being held with feet to the fire (waterboarding?) to explain where the $$ are?

Where is Justice Dept. (Eric the beHolder) on this? Where is Big Media on this?

Tue, 11/22/2011 - 14:41 | 1903389 Uchtdorf
Uchtdorf's picture

Fellows, give it up. The sheeple are just not going to get riled up about this. I was recently talking with a fairly savvy business guy and mentioned MF Global...Jon Corzine...commingling of funds...hello? His eyes were 100% glazed over. He knew nothing about this. I am convinced that it is too late for justice to reign on this planet in its present condition. We will have to go through the fire. See you on the other side.

Got preps?

Tue, 11/22/2011 - 15:42 | 1903733 andybev01
andybev01's picture

...got perps?

Tue, 11/22/2011 - 15:25 | 1903640 Uchtdorf
Uchtdorf's picture

Meanwhile...

A U.S. judge on Tuesday sentenced Antoin "Tony" Rezko, a former Chicago fundraiser for President Barack Obama, to 10-1/2 years in prison for corruption and extortion. 

Rezko's conviction was among a slew of guilty pleas that led to the conviction in two trials of former Democratic Illinois Governor Rod Blagojevich and several of his aides.

 

A Syrian immigrant who earned millions in the real estate and restaurant businesses, Rezko has been imprisoned since his 2008 conviction on 16 fraud and attempted bribery counts.

 

"Enough is enough. Corruption in Illinois has to stop," U.S. District Judge Amy St. Eve in handing down sentence to the now-gaunt, 56-year-old Rezko.

 

Rezko became a minor campaign issue for Obama during the 2008 presidential race. The two had become close friends and Rezko had raised tens of thousands of dollars for the then-Illinois state senator's successful U.S. Senate and presidential campaigns.

 

At one point, the Republican National Committee referred to Rezko as Obama's "money man".

 

Rezko also advised Obama in the purchase of the future president's large home on the south side of Chicago. Rezko's wife purchased and then resold to the Obama family a side yard to the home they could not afford initially. (http://www.reuters.com/article/2011/11/22/us-usa-crime-rezko-idUSTRE7AL22X20111122)

Tue, 11/22/2011 - 13:53 | 1903143 Forgiven
Forgiven's picture

Title 18, U.S.C., Section 242
Deprivation of Rights Under Color of Law

This statute makes it a crime for any person acting under color of law, statute, ordinance, regulation, or custom to willfully deprive or cause to be deprived from any person those rights, privileges, or immunities secured or protected by the Constitution and laws of the U.S.

This law further prohibits a person acting under color of law, statute, ordinance, regulation or custom to willfully subject or cause to be subjected any person to different punishments, pains, or penalties, than those prescribed for punishment of citizens on account of such person being an alien or by reason of his/her color or race.

Acts under "color of any law" include acts not only done by federal, state, or local officials within the bounds or limits of their lawful authority, but also acts done without and beyond the bounds of their lawful authority; provided that, in order for unlawful acts of any official to be done under "color of any law," the unlawful acts must be done while such official is purporting or pretending to act in the performance of his/her official duties. This definition includes, in addition to law enforcement officials, individuals such as Mayors, Council persons, Judges, Nursing Home Proprietors, Security Guards, etc., persons who are bound by laws, statutes ordinances, or customs.

Punishment varies from a fine or imprisonment of up to one year, or both, and if bodily injury results or if such acts include the use, attempted use, or threatened use of a dangerous weapon, explosives, or fire shall be fined or imprisoned up to ten years or both, and if death results, or if such acts include kidnapping or an attempt to kidnap, aggravated sexual abuse or an attempt to commit aggravated sexual abuse, or an attempt to kill, shall be fined under this title, or imprisoned for any term of years or for life, or both, or may be sentenced to death.

Tue, 11/22/2011 - 13:55 | 1903151 Forgiven
Forgiven's picture

Is it possible that the Trustee and CME and CFTC are attempting to deny the customers rightful control of customer property?

Tue, 11/22/2011 - 13:51 | 1903134 Antifederalist
Antifederalist's picture

If the Commodity Customer Committee is not recognized by the judge then we will know the fix is in. 

Tue, 11/22/2011 - 13:51 | 1903132 SirIssacNewton
SirIssacNewton's picture

This doesn't come even close to passing any smell test or the smallest fairness test.  All these conflicts of interest with nary an honest person to be found and all the clients are lined up to be fleeced...ergggg.

Tue, 11/22/2011 - 13:45 | 1903106 Amish Hacker
Amish Hacker's picture

What does it say about the diligence and honest intentions of the investigators that Jon Corzine hasn't even been questioned?

Tue, 11/22/2011 - 13:42 | 1903093 LawsofPhysics
LawsofPhysics's picture

More assinine paper pushing in an attempt to cover up a clear series of crimes and fraud.  The rule of law is dead, justice is a joke, let the paper burn already and let's get this free-for-all started.  Got physical and know the value of your labor?  You better.

Tue, 11/22/2011 - 13:41 | 1903084 El Gordo
El Gordo's picture

Call in Eric Holder.  He should be able to make the whole thing disappear without leaving even a whisp of smoke - better than a magician.

Tue, 11/22/2011 - 13:31 | 1903027 SwingForce
SwingForce's picture

Maybe Corzine injected radioactive dye into the corrupt system before it collapsed?

Tue, 11/22/2011 - 13:26 | 1903005 NotApplicable
NotApplicable's picture

This saga just gets stranger and stranger.

Kind of answers the question of whether or not this was a take-down.

Meanwhile, you can bet that the shredders (both digital and physical) are running overtime.

Do NOT follow this link or you will be banned from the site!