MF Global - CFTC Knows Where The Money Is

CFTC commissioner Jill Sommers has said publicly that she knows where MF Global customers' money has gone. ...but she won't tell us. The CFTC has been a disappointment.

I sent Commissioner Sommers the following letter today...

Commissioner Jill Sommers
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

January 6, 2012

Reuters 12/14/2011:

“We certainly don’t want to lead anyone to believe we don’t know what happened. We do know, and we see where all the transactions went,” said Sommers, a Republican commissioner, in an interview on Wednesday.

Commissioner Sommers;

I’m an MF Global customer. Like thousands of others, I hope to get my money back.

You have admitted that you know where the money went.

I ask you to publicly disclose this important information immediately.

Secrecy now can serve no good purpose.

Secrecy does harm thousands of MF Global customers, like me, who are struggling to get our money back. With this knowledge in hand, we could make the correct arguments, to the correct courts, to preserve our money, and return it to us. If we are denied this information by you, it seems quite likely that the one of the several bankruptcy proceedings now underway may distribute our money to creditors, such as JP Morgan. The Louis Freeh and Jamie Dimon team appear to be working very hard to make this happen.

I imagine that you justify your secrecy with the excuse of an “ongoing investigation”, however that is a poor argument in the present situation. MF Global has been shut down, and all the records of every imaginable kind have been sequestered by regulators and law enforcement. Sequestered records will not change upon your disclosure.

There is no harm in disclosure. There is harm in secrecy.

The public good demands disclosure.

History may know you as a leader of the CFTC that destroyed faith in US markets by failing in its regulatory duty and allowing MF Global to steal from thousands of customers, or perhaps history will know you as the commissioner who broke the veil of secrecy and told thousands of US citizens where their money was .

Which would you prefer?

Thank you,

Xxxxxxxx Xxxxxxx

Let the folks at CFTC know what you think. Write or send them a fax. They need to hear from lots of MF Global customers.

CFTC fax numbers:
Commissioner Sommers 202-418-5067
Commissioner Chilton 202-418-5620
Commissioner O'Malia 202-418-5550
Commissioner Wetgen 202-418-5072
Chairman Gensler 202-418-5533
Inspector General Lavik 202-418-5522
General Counsel Berkovitz 202-418-5524
Director of Enforcement Meister 202-418-5523

You can also tweet @CFTC

MF Global - Trustee Giddens Sucks

Today I called the hotline run the the trustee of the MF Global liquidation, James Giddens, 888-236-0808 .

A nice fellow answered the phone. I told him I had submitted my claim (per the trustee's instructions, using the trustee's 17 page form) and I wanted to know if he could verify that they had received it.

His response: "We don't have that information. We have a more general sort of information."

Indeed.

I asked when we would be able to verify that our claims had been received.

"We don't have that information."

What a waste of time.

In a related story, Giddens is also the trustee for the liquidation of Lehman. You may recall that Lehman fell 3 years ago. Yesterday Giddens asked the court for permission to pay some money back to Lehman customers. Bloomberg Article

"Trustee James Giddens, ... asked a judge to approve the distribution yesterday, more than three years after the Lehman parent filed the biggest bankruptcy in U.S. history. He didn’t say how much money customers can expect, only that his goal was to make “a significant” payment."

Customers have been waiting three years. Giddens tells the judge that he has the money in hand, yet he refuses to tell customers how much money they can expect, sometime next year when he gets around to distributing it.

Giddens represents himself to the judge as experienced. I can see that he does indeed have lengthy experience holding on to customers' money.

PS: I highly recommend the only guys who appear to be working to get money back to MF Global customers: James Koutoulas and John Roe of the Commodity Customer Coalition. I've joined, and I suggest you do too

MF Global - Complex Structure / Flakey Trustee

As MF Global customers, we need to interact with the court and the trustee. Before we can do this, we must understand what is being liquidated by whom. MFG had a complex corporate structure: A holding company and 47 subsidiaries!

Three of these are in some form of bankruptcy or liquidation in the US.

The full corporate structure can be found in the most recent 10K that MF Global filed with the SEC. I'll reproduce the 11 subsidiaries in the US below.

MF Global Holdings Ltd (A)
-MF Global Special Investor LLC
-MF Global Holdings USA Inc
--MF Global Inc (B)
--MF Global Capital LLC
--MF Global Market Services LLC
--MF Global Finance USA Inc (C)
--MF Global FX Clear LLC
--MFG 717 Firth Avenue Inc
--MF Global Investment Management LLC
--MF Global FX LLC

(B) is the company that held the customer accounts. It has been in SIPA liquidation by trustee James Giddens for about a month now. See the trustee's web site for gory details. US Bankruptcy Court New York Southern District Case No. 11-2790.

Giddens has issued remarkably obtuse statements about missing money. The missing money is the reason he can't give us back the money we had in our accounts. (More on that later.)

(A) is the company whose stock traded on NYSE. US Bankruptcy Court New York Southern District Case No. 11-15059. Former head of the FBI Louis Frees was just appointed trustee in this case on 11/25. At the time of this writing he hasn't had a day in office yet. Frees is the guy to watch!

(C) I have no idea what this subsidiary does, or why it has its own bankruptcy proceeding. US Bankruptcy Court New York Southern District Case No. 11-15058.

The claims notice agent has created a website with information on (A) and (C).

Now, back to our money.

I've reached the conclusion that we (customers) cannot afford to take the statements of the trustee Giddens at face value.

There have been hundreds of news stories in the last few days about the stunning development that the missing money has grown from $600 Million to $1.2 Billion. These stories were all based on a single sentence in a release from the trustee. What did he actually say?

From his 11/21/2011 release...

"At present, the Trustee believes that even if he recovers everything that is at US depositories, the apparent shortfall in what MF Global management should have segregated at US depositories may be as much as $1.2 billion or more."

Yipes. There are a lot of wiggle words in there that never made it into any of the news stories. First, he says "if" he recovers everything "at US depositories". This detail seems to never be reported. (Journalism is dead.) What does it actually mean? Does it mean that the trustee knows of segregated funds that are at non-US depositories? He doesn't say. He seems to work hard to avoid telling us what he knows. Newspapers report this as if the funds are "missing" in the sense of "nobody knows where they are". The trustee hasn't said that. He may know where the funds are.

Now, what does he say about the amount? Some newspapers have reported things like "might be as much as $1.2B". Others have reported "more than $1.2B". Which is right? Astonishingly, the bozo trustee said both of these things! Even more remarkable, he said them both in the same sentence! He said "as much as $1.2 billion or more". When I was in school, "as much as X" meant less than or equal to X. "more" meant greater than X. If you say something is less than or equal to X or it is greater than X, you are saying the number might be anything at all. You reveal no information whatsoever. That's what the trustee did. It is doublespeak.

It is no news that customers like me think this is BS. What do folks who actually know what is going on think? Most of them don't speak up. Astonishingly, one has spoken up. The Chicago Mercantile Exchange issued a release that says, roughly speaking, that the trustee is feeding us nonsense.

"While the final accounting of customer segregated assets and claims will occur in the bankruptcy process, CME Group is confident that recent reports of significantly larger customer segregated shortfalls are incorrect."

Strong words. CME is saying the trustee, Giddens, is full of beans.

My working theory: The trustee only controls a small fraction of the MF Global empire. He's liquidating one of 47 subsidiaries. He's afraid to speak for what he does not control. That includes stuff outside the US, and also stuff in those other ten US subsidiaries. The money we need is probably present, but simply somewhere it was not supposed to be. Now we will learn whether it gets returned.

This is why Freeh is so important. We now have a trustee in charge of the chapter 11 bankruptcy of the holding company. Will he make funds available to Giddens to return to us?

PS: I believe all MF Global customers should consider joining the Commodity Customer Coalition. I have. www.commoditycustomercoalition.com