- MF Global update: Bankruptcy proceedings, hearings and customer advocates.
- Latest on MF Global collapse and fallout.
- A conversation with John Roe, co-founder of the Commodity Customer Coalition.
In late November, the MF Global collapse was a month old, farmers and ranchers had assets frozen in bankruptcy court and investigators had begun efforts to locate some $1.2 billion in “lost” customer funds at the firm.
For more, see here.
At the time, Farm Press spoke with John Roe, principal at BTR Trading Group, about efforts by the newly-formed Commodity Customer Coalition to influence bankruptcy court proceedings and upcoming congressional hearings on behalf of MF Global customers.
For more, see here.
On Tuesday morning (Dec. 20), following four congressional hearings and busy court sessions, Roe – the son of Tennessee Rep. Phil Roe -- revisited the swirl of MF Global happenings, where things currently stand in Congress and the courts, and speculated on the actions of the firm’s leadership. Among his comments:
On the MF Global bankruptcy proceedings…
The coalition’s “motion to prevent JP Morgan’s use of cash collateral was denied. But we were successful in inserting language into that motion that if any of that money is proven to be client funds, it’ll come straight back to the clients. So … we got what we wanted.
“That’s kind of what we’ve done in the court all along. Our motions have been either denied or not actually ordered but what we wanted has been inserted into the orders that have transpired.
“Right now, we have nothing pending before the court. However, we are in the process of drafting a few motions that will attempt to pierce the veil and go after the holding company. We’re still developing a legal theory on that because that’s the issue we see coming down the road.
“We want to get the remaining 28 percent” of funds still held back to clients. “Actually, it’s less than 28 percent because the trustee has about $1 billion that he hasn’t released yet. So, it’s more like the last 15 percent (of client funds).
“We’ll have to try and get ahead of” other claimants of the funds. “There won’t be enough money in the brokerage unit for that. We’ll have to go after any funds at the holding company level.
“Beyond the traceable funds, any money shifted there, we’ll have to work out a theory where we can actually pierce the veil and go after the assets of the holding company. We’ll be filing motions and pleadings going forward to try and do that.”
On JP Morgan’s role in the MF Global collapse and bankruptcy…
“We’re very suspicious of JP Morgan’s actions throughout this. It’s definitely a case of the fox in the henhouse.
“You have JP Morgan as the custodian of some client funds. You have JP Morgan as the chief creditor and head of the creditor’s committee. You have JP Morgan buying various units of MF Global up for sale. And you have JP Morgan potentially engaging in transactions where they’re buying actual trades off the book at MF Global during the liquidation at steep discounts for profit.
“If those aren’t a number of conflicts of interest, I don’t know what is…
“We’re very interested to know if the liquid-to-maturity trades were liquidated and purchased by anyone trading units of JP Morgan – or, perhaps, brokered by JP Morgan. If they were, at steep discounts and the trades are actually going to be profitable, then it’s a situation where we need to call those back to the broker for the benefit of the customer.
“Additionally, we’re looking at the conflicts of interest that abound between JP Morgan and the trustee. One of our members filed a motion that was granted to request more information on the trustee’s relationship with JP Morgan and the potential conflicts of interest that arise there.
“And we’re interested in potentially advising FCMs (Futures Commission Merchant) and others with business at JP Morgan,” to cease that business. “It’s very clear they’re massaging the bankruptcy process for their benefit. … We’re looking at ways to take the fight to them.”
What about the $200 million found a couple of weeks ago at a JP Morgan London branch?
“We understand the CFTC is tracing that. We don’t have any additional information at this time.
“We can speculate, though. I think what happened is the music stopped on Oct. 31,” when MF Global fell. “That money was transferred, perhaps, to that affiliate in London and the collateral was never sent back.
“We’re interested in seeing what the CFTC will do about that. To our mind, it’s a simple call-back. The money shouldn’t be (at the affiliate), so send it back.
“We’ll be filing a motion to get that back if that’s the case.”
What about the interaction between the coalition and JP Morgan? There was supposed to be a powwow…
“I haven’t communicated directly with (JP Morgan Chase head, Jamie) Dimon or anyone at JP Morgan. But I’d be flabbergasted if they want to pick a fight with MF Global customers, especially given all the conflicts of interest.
“I’d certainly want to keep the (customers) as close to being on their side as possible and show JP Morgan is interested in working with customers.
“We reached out to JP Morgan through a few channels and it’s our understanding they don’t want to meet with us. That doesn’t mean they want to pick a fight.
“If they do, it’ll probably be something that results in a negative publicity campaign. I don’t know why they’d want that. But if it comes down to them trying to prime customers, we’ll take the fight to them.”